Moneycontrol Pro Panorama | Defence: Making in India for the world

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Dear Reader,

The government’s defence indigenisation programme has revitalised the shares of defence public sector undertakings. Most have re-rated in the past one year. The order books of Bharat Electronics and Hindustan Aeronautics have risen significantly in FY24. The focus on domestic manufacturing is also yielding export orders.

 Over the weekend, Hindustan Aeronautics signed a contract with Guyana Defence Force, Government of Guyana, to supply two Hindustan-228 commuter aircraft. As Indian companies gain manufacturing capabilities, they are pitching their products to overseas customers.

In January, Cochin Shipyard received a Rs 500-crore order from a client in Europe taking its total export order book to Rs 2,688 crore. Bharat Electronics already boasts of a sizeable export order book and business. In the December 2023 quarter, the company clocked export revenue of Rs 400 crore.

The locally developed Akash weapon system is being pitched for export markets, the execution of which will be done by Bharat Dynamics and Bharat Electronics. As of January, Bharat Dynamics had an export order book of Rs 2,580 crore.

Both Bharat Dynamics and Bharat Electronics are trying to get export orders for Akash weapon systems. Similarly, Hindustan Aeronautics is looking to build export business in the aircraft and helicopter industry, point out analysts. 

The government’s diplomatic outreach is aiding domestic companies. In the last earnings call, Bharat Electronics said it is working with several government agencies for export orders.

At the aggregate level, India’s annual defence export revenue rose significantly in the past five years. Total exports reached Rs 16,000 crore in FY23. While the government has set a lofty target of Rs 50,000 crore in defence exports by FY29, investors should note that this business can be lumpy for domestic companies.

Large orders are often linked to bilateral relations and are susceptible to supply-chain disruptions. For instance, the performance of Bharat Dynamics was impacted in 9M FY24 due to the Russia-Ukraine war, tensions in the Middle East and delay in receipt of intermediate goods from foreign vendors.

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