Certain companies are taking undue advantage of a loophole for qualifying as 'Make in India' defense companies, said Nitin Mangal, a SEBI-registered research analyst on micro-blogging platform X.
If a vendor or a manufacturer is buying certain goods from a Indian company then it is classified as indigenous goods and qualified under 'Make in India', said Nitin Mangal, known for corporate governance and accounting research. He is renowned for having flagged accounting concerns in Kingfisher Airlines, which subsequently went bust.
Also read: Defence stocks gain as local manufacturing, geopolitics boost order flows: Jefferies
He further says that companies have made a cartel to benefit from this loophole. Mangal explains: "Say, a company A does not manufacture goods but buys it from company B who imports it. This way it qualifies for 'Make in India." He said that any regulatory action may wipe out huge top line of these defense companies.
Also read: In Charts: Four reasons why Jefferies is bullish on the defence sector
Defense stocks have seen a strong rally in the last one year on the back of 'Make in India' theme and growing geo-political tensions.
According to a Jefferies report in April, "We believe India’s capital defense spend should continue at the 7-8 percent CAGR seen in the last decade while an indigenisation focus will drive double-digit growth in domestic defense spend." It further said, doubling of domestic defense spend for the period from FY2024 to FY2030 should continue to drive stocks upwards.
In a January report, Antique Stock Broking has said that they continue to be bullish on the segment and expect defense PSUs to benefit immensely as the Ministry of Defense has placed multiple big-ticket orders, which has helped DPSUs like BEL, HAL, and BDL to bolster their already strong order book and meaningfully increase revenue visibility for years to come. It further said, “We continue to believe in the robust ordering prospects that are expected to play out in the medium term as India looks to modernize its armed forces and also scale up exports with an emphasis on Make in India,” they said.
Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
