Make in India has been one of the signature initiates of the current government. Entering its third term, the government continues its push for Make in India products and services. And, defence is one of the sectors that has massively benefitted from it. In recent years the defence Ministry and other resources have been deployed to help India become one of the leading Global defence manufacturing hubs.
As a result, defence stocks have been in high demand in recent times. Their growth supports these claims. As defence stocks constantly hit new highs, it can be a great sector for investors to diversify their portfolios.
India was heavily reliant on other countries for defence production earlier, however, in recent years that has changed for the good. Higher budget allocations and resource availability mean domestic defence companies have received a much-needed boost. Apart from making India a global defence manufacturing hub, this also has significant economic growth.
Key Steps Which Boosted the Defence Sector
Here is a list of some of the key steps taken by the current government, which has led to a boost in defence stocks.
FDI relaxation
FDI or foreign direct investment norms were relaxed and it made way for up to 74% of FDI investments and even 100% via government approval. This has allowed for more international investors and companies to join hands and manufacture in India.
Schemes
The government also launched several schemes and policies to make it easier for defence companies to focus on manufacturing. The DPEPP or Defence Production and Export Promotion Policy is a good example of the same. The policy aims to achieve a turnover of ₹ 1,75,000 crore in the sector of defence manufacturing by the year 2025. It includes an export target of ₹ 35,000 crore.
Higher Budget
Over the last few budgets, a higher allocation to domestic defence manufacturing has reassured companies about the government’s commitment to the cause. For the 2023-24 budget, the defence sector received ₹ 5.94 lakh crores, which is considerably higher than the previous year where ₹ 5.25 lakh crores were allocated.
The results of these changes are reflected in the defence stock prices. As the companies manufacture, export and sign new deals, the investments and policy changes are inching towards fruition.
Top defence Stocks
Here is a list of some of the top defence stocks in the country.
Bharat Electronics Limited
- Market capitalisation - ₹ 2,06,355 crore
- Stock price - ₹ 282
- PE Ratio - 48.7
- ROCE - 34.6%
- Dividend Yield - 0.78%
Centum Electronics Limited
- Market capitalisation - ₹ 2,393 crore
- Stock price - ₹ 1855
- PE Ratio -
- ROCE - 10.1%
- Dividend Yield - 0.32%
Cochin Shipyard Limited
- Market capitalisation - ₹ 40,267 crore
- Stock price - ₹ 1531
- PE Ratio - 45.5
- ROCE - 21.6%
- Dividend Yield - 0.64%
Data Patterns (India) Limited
- Market capitalisation - ₹ 13,276 crore
- Stock price - ₹ 2371
- PE Ratio - 70.4
- ROCE - 19.7%
- Dividend Yield - 0.27%
Paras Defence and Space Technologies Limited
- Market capitalisation - ₹ 4,097 crore
- Stock price - ₹ 1017
- PE Ratio - 107
- ROCE - 10.3%
- Dividend Yield - 0.00%
Zen Technologies Limited
- Market capitalisation - ₹ 16,816 crore
- Stock price - ₹ 1862
- PE Ratio - 109
- ROCE - 46.1%
- Dividend Yield - 0.05%
Conclusion
The defence sector has been one of the biggest beneficiaries of the Make in India initiative of the current government. As an investor, you can explore any of the above stocks to gain exposure to the sector and healthy returns.
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