India Defence Sector Check — Significant Order Inflow With Focus On Indigenisation: ICICI Securities

ICICI Securities Report

In the last week of FY23, the Ministry of Defence has approved a number of orders, benefitting public sector undertakings such as Bharat Electronics Ltd., Bharat Dynamics Ltd., Garden Reach Shipbuilders and Engineers Ltd., Cochin Shipyard Ltd. and Goa Shipyard.

Most of these orders are under the Indian-indigenously designed developed and manufactured category, in line with the government’s focus on indigenisation, hence, we expect consequential benefits for downstream companies in radars, instrumentation and surveillance systems such as Bharat Electronics and Data Patterns India Ltd.

The orders comprise the much-awaited backlog for Bharat Dynamics, Bharat Electronics and Shipyards. In our view, the primary beneficiary (among coverage companies) is likely to be Bharat Electronics with direct orders of Rs 118.3 billion and consequential benefits from Akash third and fourth regiments and Next Generation Offshore Patrol Vessels for Goa Shipyard/Garden Reach Shipbuilders. Hence, we expect Bharat Electronics to record Rs 200 billion of order inflow for FY23.

With the awarding of Akash third and fourth regiment orders, we believe that a key market expectation for Bharat Dynamics has also been met.

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