The Indian stock markets are soaring to new heights and are on a bullish run. Among many other gainers in this bullish run, a few companies also belong to the defence sector. This increased interest in the defence companies also comes from the backdrop of the many successful deals made by the government to upgrade the armed forces as well as invest heavily in this sector. This leads us investors to the obvious questions like which defence stocks can they include in their investment portfolio.
Read on to know the top defence stocks in India in terms of market capitalisation and related details of this sector.
HAL or Hindustan Aeronautics Limited was incorporated in 1963 and is based in the lake city of Bengaluru, India. This company is considered to be a pioneer in the design, development, manufacture, overhaul, repair, upgrade and servicing of aircrafts, helicopters, etc. in India and internationally. This company provides navigation systems, laser range systems, fuel management systems, radio navigation and communication equipment, etc. HAL has a diverse portfolio of serving space, defence as well as civil industries. Its indigenously produced and developed brands like Tejas are creating demand and space for Indian defence exports enabling it to reduce the trade deficit.
The key details of this company are tabled below. Figures as of July 20, 2023
| Category | Details |
| Market Capitalization | Rs. 1,28,420 crores |
| PE Ratio | 22.13 |
| Return on Equity | 26.18% |
| Debt Equity Ratio | 0.00% |
| Promotor’s Holdings | 71.64% |
| Share price | Rs. 3832.15 |
| Dividend yield | 1.04 |
The trailing returns of HAL are tabled below
| Period | Trailing Returns |
| 1 year | 110.08% |
| 3 years | 59.91% |
| 5 years | 37.02% |
| 10 years | – |
Bharat Electronics Limited was established in 1954 and is in the business of designing, manufacturing and supplying electronic equipment for defence and civilian markets in the country. The defence products of the company include defence communication products, land-based radars, electronic warfare systems, naval systems, simulators, avionics, etc. The non-defence products of the company include e-governance systems, homeland security products, civilian radars, etc. as well as electronic manufacturing services. The company also has its exports in many countries like France, the United States, Germany, China, Switzerland, Sri Lanka, Sweden, Mauritius, and Israel among others.
The key details of this company are tabled below. Figures as of July 20, 2023
| Category | Details |
| Market Capitalization | Rs. 92,067 crores |
| PE Ratio | 31.06 |
| Return on Equity | 21.95% |
| Debt Equity Ratio | 0.00% |
| Promotor’s Holdings | 51.14% |
| Share price | Rs. 126.05 |
| Dividend yield | 0.95 |
The trailing returns of Bharat Electronics are tabled below
| Period | Trailing Returns |
| 1 year | 48.21% |
| 3 years | 56.85% |
| 5 years | 31.03% |
| 10 years | 26.37% |
Bharat Forge Limited was incorporated in 1961 and has Pune as its headquarters. The company is in the business of manufacturing and selling forged and machine components in India and abroad. They operate across various sectors including forging, automotive, energy, construction and mining, railways, marine, aerospace, and defense industries.
The key details of this company are tabled below. Figures as of July 20, 2023
| Category | Details |
| Market Capitalization | Rs. 39,633 crores |
| PE Ratio | 67.86 |
| Return on Equity | 7.66% |
| Debt Equity Ratio | 1.01% |
| Promoter’s Holdings | 45.25% |
| Share price | Rs. 851.50 |
| Dividend yield | 0.91 |
The trailing returns of Bharat Forge are tabled below
| Period | Trailing Returns |
| 1 year | 27.36% |
| 3 years | 31.15% |
| 5 years | 7.87% |
| 10 years | 22.59% |
Mazagon Dock Shipbuilders Limited (MDL) is a leading shipyard in Mumbai, India, known for manufacturing naval vessels, submarines, offshore platforms, and supporting vessels for oil drilling operations. It was incorporated in 1934 and is now under the Government of India’s management with a significant stake. MDL’s portfolio includes tankers, bulk carriers, passenger ships, and ferries, alongside an impressive track record of indigenous ship production, including frigates, destroyers, corvettes, and more.
The key details of this company are tabled below. Figures as of July 20, 2023
| Category | Details |
| Market Capitalization | Rs. 36,705 crores |
| PE Ratio | 31.24 |
| Return on Equity | 23.08% |
| Debt-Equity ratio | 0.00% |
| Promotor’s Holdings | 84.83% |
| Share price | Rs. 1,819.65 |
| Dividend yield | 0.92 |
The trailing returns of Mazgaon Dock Shipyard are tabled below
| Period | Trailing Returns |
| 1 year | 591.23% |
| 3 years | – |
| 5 years | – |
| 10 years | – |
Bharat Dynamics Limited (BDL) is a prominent Indian company established in 1970 in Hyderabad, specializing in ammunition and missile systems production. It was founded to create a robust facility for guided weapon systems, and since then, it has been a key player in India’s defense industry. BDL’s achievements include producing various critical missiles like Prithvi, Agni, Akash, and Advanced Light Torpedoes.
The key details of this company are tabled below. Figures as of July 20, 2023
| Category | Details |
| Market Capitalization | Rs. 21,444 crores |
| PE Ratio | 60.81 |
| Return on Equity | 11.11% |
| Debt Equity Ratio | 0.00% |
| Promotor’s Holdings | 74.93% |
| Share price | Rs. 1172.80 |
| Dividend yield | 0.80 |
The trailing returns of Bharat Dynamics are
| Period | Trailing Returns |
| 1 year | 63.13% |
| 3 years | 44.16% |
| 5 years | 27.21% |
| 10 years | – |
India is rated as the third largest spender on defence across the globe and has a defence budget of approximately 2.15% of the GDP. The Government of India in recent years has given a strong push to this sector and has provided an outlay of Rs. 5.91 lakh crores in the Budget 2023-24. This is an increase of approximately 13% from the allocation in the previous budget.
The defence sector also has a special mention in the ‘Atmanirbhar Bharat’ initiative by developing indigenous cutting-edge defence technology that will not only be used in the Indian Defence forces but also will be exported to nations across the globe.
The government has set a target of achieving a turnover of Rs. 1.75 lakh crores in aerospace and defence manufacturing by 2025 and exports of Rs. 35000 crores. The exports from the defence sector have increased by over 334% in the last 5 years and now India exports its defence equipment to over 75 countries across the globe.
The government has also allowed foreign investment (FDI) to flow in the defence sector of up to 74% under the automatic route and 100% through the government route. The multiple defence agreements with many nations coupled with the domestic demand are set to increase the growth opportunities for defence sector companies in the coming years.
There has been sustained confidence and interests among the investors in the defence sector companies backed by the government policies and capital outlay in the budget of 2023. However, it is important for the investors to evaluate the fundamentals of the company and other macro as well as microeconomic factors before making the investment decision.
Some of the key factors to consider while selecting defence stocks are the company fundaments, industry outlook, government budget and spending along with key defence policies, technological advancements, geopolitical scenario, risk of investment and the investment horizon.
India accounts for approximately 15% of the global arms import.
Budget 23-24 allocates approximately Rs 5.9 lakh crores to the defence sector which is about 13% of the budget.
A few other prominent companies in the defence sector include the Cochin Shipyard Limited, Bharat Earth Movers Limited (BEML), MTAR Technologies, Paras Defence and Space Technologies, Krishna Defence and Allied Industries Limited.
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