Over the past five years, the Indian defence sector has significantly advanced in its quest for self-reliance, propelled by initiatives such as Atmanirbhar Bharat and Make in India. The growing public-private sector collaboration also renders a robust and competitive defence ecosystem, resulting in superior wealth creation for investors.
In this blog, we will explore the top defence stocks in India that have generated substantial returns for investors over the past five years and continue to showcase substantial growth potential.
The Indian Defence Industry: A Synopsis
India ranks fourth globally in terms of military spending, with an estimated expenditure of nearly $81.4 billion in 2022, witnessing a jump of 6% from the previous year, based on data from the World Bank and it continues to grow.
In FY24, the Ministry of defence was allocated ₹5.94 lakh crore, marking a 13% increase from the previous year. The capital outlay of ₹1.62 lakh crores, or 57% of the overall budget, is allocated to modernization and infrastructure development. And, of this, nearly ₹1 lakh crore is earmarked for the domestic industry.
The surge in defence spending, coupled with heightened collaboration between the public and private sectors and the government’s emphasis on indigenization, has provided a substantial boost. Companies are establishing R&D centers and production lines in India, contributing to a significant export increase over the past decade.
India’s defence exports have witnessed a remarkable growth of 23 times, increasing from ₹686 crores in FY14 to almost ₹16,000 crores in FY23. According to the Ministry of Defence, India is now exporting weapon systems to over 85 countries, and approximately 100 companies are actively exporting defence products.
Also, the number of listed defence companies has grown in the last five years, creating massive wealth for investors. Let’s check out some of the best defence stocks in India.
Top 10 Defence Sector Stocks in India
- Hindustan Aeronautics Limited
- Bharat Dynamics Limited
- Bharat Electronics Limited
- Solar Industries India
- Mazagon Dock Shipbuilders
- Cochin Shipyard Ltd.
- Garden Reach Shipbuilders
- Paras Defence & Space Technologies
- Data Patterns
- MTAR Technologies
Top Listed Defence Sector Shares in India: An Overview
1. Hindustan Aeronautics Limited (HAL)
HAL is India’s premiere state-owned aerospace and defence manufacturer, which was incorporated as Hindustan Aircraft Limited on 23rd December 1940 to manufacture aircraft in India. Over the years, the company, through various license manufacturing activities and research & development activities, has developed expertise in the design of fixed-wing and rotary-wing aircraft. It also supplies crucial hardware to the Indian Air Force.
| Market Cap | Share Price (as of 14th Jan 2024) | All-time High Level | PE Ratio | 5 yr CAGR Return | ROCE (FY23) |
| ₹2,00,763 crore | ₹3,002 | ₹3,079 | 33.2 | 51% | 28% |
In FY23, the company recorded an 8% growth in revenue from operations to ₹26,927.85 crores, from ₹24,621.66 crores in FY22. And recorded a net profit of ₹5,811.17 crores, up 14% from ₹5,086.50 crores.
And, in H1FY24, revenue from operations increased to ₹9,551.05 crores from ₹8,767.25 crores in H1FY23. It recorded a net profit of ₹2,050.76 crores against ₹1,841.35 crores.
2. Bharat Electronics Limited (BEL)
BEL was established in 1954 and manufactures specialized electronic equipment requirements for the Indian armed forces. The company’s shares were listed in 2000, becoming the first defense PSU to get Mini Ratna Category I status.
| Market Cap | Share Price (as of 14th Jan 2024) | All-time High Level | PE Ratio | 5 yr CAGR Return | ROCE (FY23) |
| ₹1,34,134 crore | ₹184 | ₹189 | 40.4 | 43.22% | 33.15% |
In FY23, the company reported revenue from operations of ₹17,646.20 crores, as against ₹15,313.76 crores. Net profit increased to ₹3,006.67.22 crores from ₹2,348.93 crores.
H1FY24 total income increased to ₹7,396.01 crores from ₹6,994.63 crores in H1FY23. Net profit was ₹1,328.31 crores as against ₹990.73 crores.
3. Solar Industries India
Solar Industries is a leading explosives manufacturer established in 1995 and is into manufacturing industrial and military explosives, ammunition, propellants, bombs & warheads, initiating systems & pyros, and integration of rockets.
| Market Cap | CMP (as of 14th Jan 2024) | All-time High Level | PE Ratio | 5 yr CAGR Return | ROCE (FY23) |
| ₹66,144 crore | ₹7,310 | ₹8,499 | 81.8 | 48% | 32.19% |
The consolidated revenue in FY23 registered a 75% growth to ₹6,923 crores from ₹3,948 crores in FY22. And, profit after tax during the period was up more than 78% to ₹811 crores, compared to ₹455 crores the previous year.
In H1FY24, the total income declined to ₹3,045.58 crores from ₹3,195.18 crores in H1FY23. Net profit increased to ₹410.58 crores from ₹371.25 crores the previous year.
4. Mazagon Dock Shipbuilders
Mazagon Dock is one of India’s premier warship shipbuilding yards, with its history dating back to 1774, when it was established as a small ship-repairing company. Since 1960, after its takeover by the government, the company has built over 801 vessels, including 28 warships and 7 submarines.
| Market Cap | CMP (as of 14th Jan 2024) | All-time High Level | PE Ratio | 3 yr CAGR Return | ROCE (FY23) |
| ₹46,236 crore | ₹2,292 | ₹2,485 | 36.8 | 119% | 34.37% |
In FY23, the company’s revenue from operations was at ₹7827.18 crores compared to ₹5,733.28 crores in FY22. And, profit after tax witnessed a significant rise of 83% to ₹1,072 crores from ₹586.47 crores.
For the H1FY24 period, the company’s revenue from operations increased to ₹4,000.46 crores from ₹3,932.68 crores in H1FY23. Profit after tax also increased to ₹590.49 crores in H1FY24 from ₹412.02 crores in the same period the previous year.
5. Bharat Dynamics Limited (BDL)
BDL is a state-owned defence equipment manufacturing company established in 1970 and specializes in manufacturing ammunition and missile systems. It has developed Akash Missile Systems, Astra Weapon System, Anti-submarine Warfare Suite, and many other platforms and systems.
| Market Cap | CMP (as of 14th Jan 2024) | All-time High Level | PE Ratio | 5 yr CAGR Return | ROCE (FY23) |
| ₹31,645 crore | ₹1,727 | ₹1,811 | 74.4 | 44% | 15.41% |
In FY23, the company achieved a sales turnover of ₹2,489.39 crore as against ₹2,817.40 crore in the previous financial year. And achieved a profit after tax of ₹352.17 crores compared to ₹499.92 crores in FY22.
For the half year ending on 30th September 2023, the company’s sales turnover is ₹913.53 crores compared to ₹1,229.58 crores in the same period the previous year. Net profit increased to ₹188.91 crores as against ₹115.67 crores in H1FY23.
ALSO READ: TOP 10 SOLAR ENERGY STOCKS
6. Cochin Shipyard Ltd.
Cochin Shipyard is India’s leading shipbuilding yard, conceived in 1969, and offers shipbuilding, ship repair, marine engineering, and related services. INS Vikrant, India’s first aircraft carrier to be built in India, was constructed by Cochin Shipyard.
| Market Cap | CMP (as of 14th Jan 2024) | All-time High Level | PE Ratio | 5 yr CAGR Return | ROCE (FY23) |
| ₹19,832 crore | ₹754 | ₹803 | 47.4 | 32% | 10.80% |
The company’s revenue from operations for FY23 amounted to ₹2,330.46 crores, compared to ₹3,190 crores. And, net profit for the year was ₹334.49 crores, a decrease from ₹586.57 crores in FY22.
H1FY24 revenue is reported at ₹1,660.35 crores compared to ₹1,241.65 crores in the same period the previous year. And, profit after tax during the period is ₹280.17 crores as against ₹154.97 crores.
7. Garden Reach Shipbuilders & Engineers Ltd. (GRSE)
GRSE is a Kolkata-based shipbuilding and repair company incorporated in 1884. The company is involved in shipbuilding, heavy engineering, and ship engine development.
| Market Cap | CMP (as of 14th Jan 2024) | All-time High Level | PE Ratio | 5 yr CAGR Return | ROCE (FY23) |
| ₹10,037 crore | ₹876 | ₹975 | 36.3 | 57% | 21.81% |
In FY23, revenue from operations grew by 45% to ₹2,561 crores from ₹1,541 crores in FY22. Similarly, profit during the period also increased by 20% to ₹228 crores from ₹189.53 crores.
And, in H1FY24, the revenue from operations increased to ₹1,653.81 crores from ₹1,261.37 crores. Net profit for the period increased to ₹157.41 crores from ₹108.90 crores in H1FY23.
8. Data Patterns
Data Patterns is a vertically integrated defence and aerospace electronics solution provider with expertise in developing radar systems, electronic warfare, rugged displays, fire control systems, launch vehicle check-outs, avionic systems, and many more.
| Market Cap | Share Price (as of 14th Jan 2024) | All-time High Level | PE Ratio | 5 yr CAGR Return | ROCE (FY23) |
| ₹11,105 crore | ₹1,984 | ₹2,485 | 74.9 | 22% | 14.78% |
In FY24, the company’s total revenue increased by 47% to ₹462.67 crores from ₹314.81 crores. And, net profit increased to ₹124 crores from ₹93.97 crores in FY23.
In H1FY24, total revenue increased to ₹220.45 crores from ₹160.08 crores in H1FY23. And, profit for the period increased to ₹59.62 crores from ₹35.29 crores.
9. MTAR Technologies
Established in 1970, MTAR Technologies is a leading national player in the precision engineering industry engaged in manufacturing mission-critical precision components, projects with high national importance, precision machining, specialized fabrication competencies, and many more.
| Market Cap | Share Price (as of 14th Jan 2024) | All-time High Level | PE Ratio | 5 yr CAGR Return | ROCE (FY23) |
| ₹6,607 crore | ₹2,148 | ₹2,920 | 64.1 | – | 19.96% |
In FY23, the company witnessed a 73% jump in revenues to ₹573.3 crores, compared to ₹322 crores in FY22. Similarly, net profit increased by 70.9% to ₹104.07 crores from ₹60.8 crores.
For the half-year that ended on 30th September 2023, the company’s total revenue increased to ₹324.34 crores from ₹226.63 crores in the same period the previous year. And, net profit for the period was at ₹40.79 crores compared to ₹40.9 crores in H1FY23.
10. Paras Defence & Space Technologies
Paras Defence is a Tier 2 defense engineering company with business operations in five verticals- defense & Space Optics, Defense Electronics, Heavy Engineering, Electromagnetic Pulse Protection Solutions, and Niche Technologies.
| Market Cap | Share Price (as of 14th Jan 2024) | All-time High Level | PE Ratio | 5 yr CAGR Return | ROCE (FY23) |
| ₹3,001 crore | ₹770 | ₹848 | 84.1 | – | 12.19% |
In FY23, total income increased by 22% to ₹222.43 crores from ₹182.56 crores in FY22. And, net profit increased by 33% to ₹35.94 crores from ₹27.08 crores in FY22.vRevenue for H1FY24 rose from ₹98.45 crores to ₹111.67 crores. And, net profit after tax during the period is ₹14.57 crores, compared to ₹14.94 crores in H1FY23.
READ NOW: 10 AI STOCKS IN INDIA TO INVEST IN
Factors to Consider Before Investing in the Defence Sector in India
Over the years, we have seen a dynamic shift in military strategies, technologies, and doctrines. The warfare has witnessed a transformative journey integrating advanced technologies, cyber capabilities, artificial intelligence, and unconventional tactics.
Therefore, we continue to witness a sustained rise in government investments in the defence sector to adapt to evolving dynamics, contributing to its status as an evergreen sector. Also, companies engaged in the production and services of defence equipment are poised for continued growth.
The following are the things to consider if you’re thinking about buying Indian defence stocks:
Government Regulation and Policies: It is one of the key factors influencing the growth of the defense sector in any economy. Investors should carefully monitor and analyze the government policies and regulations related to defence procurement, licensing, and rules about foreign direct investments.
Budget Allocations: The growth of the defence sector is highly dependent on governmental spending. Analyzing the government’s budgetary allocation to defence sector and captial outlay for the procurement of weapon systems provides critical insights. Increased funding often indicates growth.
Technological Advancements: You must keep up-to-date on technological advancements in the defense sector and how companies adapt to modern warfare needs.
Collaboration and Partnerships: defence companies often collaborate with governmental and foreign units for product development. You need to assess the collaborations and partnerships of the companies as they can indicate growth prospects.
Domestic & Global Demand: Assessing the overall domestic and global demand for defense products, considering geopolitical dynamics and security concerns, gives vital insight into the trend in the sector.
Financial Health of Companies: Before investing, assess the financial health and stability of the defence companies, considering factors like profitability, debt level, order book, and other key ratios.
Conclusion
The defence sector offers a unique opportunity for investors to participate in the growth of a critical and resilient industry. Evolving geopolitical dynamics, increased governmental spending, advancement of technologies, and government push for local manufacturing of defense equipment showcase the strong growth potential of defense stocks in India.
OTHER TRENDING ARTICLES
10 REAL ESTATE STOCKS | HOW TO MAKE PASSIVE INCOME? | WHAT IS FINANCIAL ADVISORY?
FAQs on Defence Stocks
Which defence stock is best?
Defense stocks or companies with a proven track record in product development, a healthy order book, and stable finances are considered best to invest in.
Which stocks to buy during the war in India?
Defense stocks are considered best to buy during the war because of the increased demand for weapons and ammunition, which results in healthy profits for companies.
Why are defence stocks rising?
The surge in defense stocks can be attributed to a hike in the defense budget, supportive policies for domestic production and procurement, a focus on indigenization, growth in order books, and robust financial performance by the companies.
I’m Archana R. Chettiar, an experienced content creator with
an affinity for writing on personal finance and other financial content. I
love to write on equity investing, retirement, managing money, and more.