04 Dec , 2024 By : Debdeep Gupta
Shares of defence companies surged as much as 5 per cent in early trade on December 4 after the Defence Acquisition Council (DAC) approved five acquisition proposals worth over Rs 21,772 crore in a bid to ramp up defence preparedness. Stocks like Mazagon Dock Shipbuilders and Garden Reach Shipbuilders led the rally among defence names, surging close to 5 per cent while others like Bharat Electronics, Hindustan Aeronautics and Bharat Dynamics were up 2-3 per cent.
The approval of the acquisition proposals is expected to lift the order books of these defence companies, thereby sparking strong buying in these counters.
As part of the approval, the DAC has granted Acceptance of Necessity (AoN) for proposals including Water Jet Fast Attack Crafts (WJFACs), Electronic Warfare Suites, Radar Warning systems, and Advanced Light Helicopters. Following this, the Navy will acquire 31 new WJFACs to enhance Low-Intensity Maritime Operations, Surveillance, Patrol, and Search and Rescue (SAR) missions near the coast. In the past, Garden Reach Shipbuilders and Engineers supplied WJFACs to the Indian Navy, fueling hopes of the company bagging a repeat order for the same.
Similar approvals were also granted for the acquisition of 120 Fast Interceptor Craft (FIC-1), designed to escort high-value units like aircraft carriers, destroyers, and submarines, and the overhaul of T-72 and T-90 tanks and Sukhoi fighter aircraft engines to extend their service life and operational readiness.
Soon, the acquisition of an Electronic Warfare Suite (EWS) will also be initiated to enhance the operational capabilities of SU-30 MKI. Defence equipment manufacturer Bharat Electronics had developed an EWS for the Indian Air Force.
Amit Dixit, defence analyst at ICICI Securities noted that this approval for defence acquisition marks a positive shift after a period of slowdown in domestic ordering. Among defence players, Dixit sees Bharat Electronics as the company that stands to benefit most, directly from the Electronic Warfare Suite (EWS) for Su-30MK-I and from nearly all the proposals.
"Astra Microwave is also likely to benefit through a trickle-down effect. Shipbuilding proposals involve smaller vessels and will attract bids from both private companies and Defence Public Sector Undertakings (DPSUs)," Dixit said. ICICI Securities has 'buy' calls on both Bharat Electronics and Astra Microwave, with price targets of Rs 350 and Rs 935, respectively.
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