- Germany allocated US$ 113 billion towards their military spending.
- China increased its defence spending by 7.1% and revised its target to US$ 229 billion.
Let’s begin. In this article on defence stocks, we will cover - | Overview of the Indian defence sector List of defence stocks listed on the Indian Stock ExchangesTop Defence Companies Listed in India1- Bharat Electronics Ltd 2- Hindustan Aeronautics Ltd 3- Solar Industries Ltd 4- Bharat Dynamics 5- Bharat Earth Movers Limited (BEML) 6- MTAR Technologies |
Overview of the Indian defence sector
Even though the pandemic has impacted the Indian economy, but still, the government has increased its defence spending from Rs. 4.78 lakh crore to Rs. 5.25 lakh crore in the recent Budget 2022. This is a strategic move as all the other countries keep updating their military system with new technology and India needs to keep up with the pace. Why so? Simply because of our neighbouring countries.
The geopolitical conflicts between India and its neighbouring countries have been increasing in the last few years. In the middle of the pandemic on 5th May 2020, the Indian troops engaged in an aggressive scuffle with China. This happened because India claimed Aksai Chin to be a part of Ladakh while China claimed that it belonged to Xinjiang. 
During the same time, India stood as the second-largest importer of military ammunitions after Saudi Arabia. India soon realised that apart from modernizing its military equipment, it must also reduce its dependency on imports. In the Budget 2022, India announced that 68% of defence-related goods will be allocated to Indian companies. So, only 32% of projects will be outsourced. This will help Indian defence companies get more projects and generate higher revenues. All of this will take defence stocks to new heights. There has also been a considerable increase in exports of equipment across the globe from India. In the year 2014-2015, India had exported defence equipment worth Rs. 1,940.64 crores. Whereas in 2020-2021, the total exports of defence equipment amounted to a whopping Rs. 8,434.84 crores. Since the year 2000, India has constantly increased its allocation to the defence budget too. 
*Source: StatistaThe defence sector is vast. It includes the army, navy and the air force. As of 2021, majority of the defence budget was utilised by the air force segment. In the air force segment, the government focused on modernising aircrafts and other equipments. Moreover, many defence companies have started their own startups to manufacture Unmanned Ariel Vehicles (UAVs). So, defence companies like Hindustan Aeronautics Limited (HAL) is working on manufacturing lightweight combat aircraft and helicopters. Apart from this, there are many other unlisted companies that are focused on manufacturing drones for defence purposes such as Sagar Defence, ideaForge, etc. By encouraging these companies to manufacture drones, India will someday become self-reliant in the field of defence. Which are the drone stocks listed on the Indian Stock Exchanges.
From all the factors listed above, it is safe to say that during normal times or during such difficult times every country will definitely spend a considerable amount of money towards strengthening and updating its military. Hence, it wouldn’t be wrong to say that investing in defence stock is always going to be in trend.Recommended watch: Best defence stocks in India
List of defence stocks listed on the Indian Stock Exchanges
| Name | Industry | Current Price | Market Capitalization(Rs. in Cr) |
| Bharat Electronics | Electronic – Components | Rs. 239 | Rs. 58,235 |
| HindustanAeronautics | Engineering | Rs. 1,648 | Rs. 55,090 |
| Solar Industries | Chemicals | Rs. 2,995 | Rs. 27,100 |
| Bharat Dynamics | Engineering | Rs. 744 | Rs. 13,642 |
| BEML Ltd. | Engineering | Rs. 1,812 | Rs. 7,547 |
| MTAR Technologies | Engineering | Rs. 1,736 | Rs. 5,340 |
| Mazagon Dock | Miscellaneous | Rs. 317 | Rs. 6,386 |
| Cochin Shipyard | Miscellaneous | Rs. 346 | Rs. 4,547 |
| Data Pattern | Electronic – Components | Rs. 878 | Rs. 4,555 |
| Garden Reach Sh. | Miscellaneous | Rs. 302 | Rs. 3,460 |
| Paras Defence | Engineering | Rs. 697 | Rs. 2,719 |
| Astra Microwave | Telecommunications – Equipment | Rs. 238 | Rs. 2,057 |
| NELCO | Telecommunications – Equipment | Rs. 745 | Rs. 1,701 |
| Premier Explosives | Chemicals | Rs. 374 | Rs. 402 |
| Walchandnagar Industries Ltd. | Engineering | Rs. 66 | Rs. 251 |
Top Defence Companies Listed in India
1. Bharat Electronics Ltd.
Bharat Electronics Limited (BEL) was established in 1954 in association with France. It was set up to meet the need for electronic equipment of the Indian Defence Services. It is a state-owned aerospace and defence company. It focuses on manufacturing advanced electronics products for ground and aerospace applications. BEL spends 7.5% of its entire turnover on research and development (R&D). This makes the company the highest spending company on R&D in the Defence Public Sector Undertaking (PSU) space. In Q2 FY2021, the total order received by the company amounted to Rs. 52,148 crores that includes fresh orders of Rs. 1,561 crores. The export orders fulfilled by the company amounted to a total of $199 million. If we take a look at the fundamentals of the company, then the market capitalisation of BEL is the highest among all the defence stocks in India. It has a market capitalisation of Rs. 50,596 crores (as on March 16, 2022). Moreover, it is a debt-free company with a Return on Equity (ROE) of 19.9%. Let’s take a look at the key financial ratios of Bharat Electronics Ltd.| Market Cap (Cr): Rs. 50,596 Cr. | Face Value: Rs. 1 | EPS: Rs. 10.7 |
| Book Value: Rs. 47.1 | ROCE (%): 27.9 | Debt to Equity: 0.00 |
| Stock PE: 19.4 | ROE (%): 19.9 | Dividend Yield (%): 1.95 |
| Total Debt (Cr): 0 | Promoter’s Holdings (%): 51.1 |
2. Hindustan Aeronautics Ltd.
Hindustan Aeronautics Ltd. is the backbone of the Indian air force system. It manufactures advanced technology equipment such as lightweight fighter aircraft and helicopters. Apart from manufacturing, it also has the ability to repair these equipments. This makes it the only Indian company which not only has specialization in aircraft manufacturing but can also repair the equipment. The company was ranked 45th amongst the top 100 defence companies across the world. Just like BEL, Hindustan Aeronautics is also a debt-free company. Let’s take a look at the key financial ratios of Hindustan Aeronautics Ltd.| Market Cap (Cr): Rs. 47,945 Cr. | Face Value: Rs. 10.0 | EPS: Rs. 108 |
| Book Value: Rs. 493 | ROCE (%): 26.2 | Debt to Equity: 0.00 |
| Stock PE: 13.3 | ROE (%): 22.6 | Dividend Yield (%): 2.84 |
| Total Debt (Cr): Rs. 6.31 | Promoter’s Holdings (%): 75.2 |
3. Solar Industries Ltd.
Solar Industries is one of the world’s leading manufacturer of bulk explosives and packaged explosives. In 2010 the company entered into the defence segment and diversified its business in two major segments -- Industrial explosives
- Defence equipment
| Market Cap (Cr): Rs. 21,776 Cr. | Face Value: Rs. 2 | EPS: Rs. 40.3 |
| Book Value: Rs. 187 | ROCE (%): 19.8 | Debt to Equity: 0.53 |
| Stock PE: 59.8 | ROE (%): 18.6 | Dividend Yield (%): 0.25 |
| Total Debt (Cr): Rs. 900 | Promoter’s Holdings (%): 73.2 |
4. Bharat Dynamics
Bharat Dynamics was incorporated in 1970 as a public sector undertaking (PSU) under the ministry of finance. It manufactures missile systems and allied equipment for the Indian Armed Forces.As of Jan 2021, the company had a total order book of Rs. 8,100 crores. It is also the only company which manufactures medium-range surface-to-air missile system named Akash and Konkur.Let’s look at the key financial ratios of Bharat Dynamics Ltd.| Market Cap: Rs. 10,542 Cr. | Face Value: Rs. 10.0 | EPS: Rs. 27.1 |
| Book Value: Rs. 147 | ROCE (%):29.6 | Dividend Yield (%): 1.28 |
| Stock PE: 21.2 | ROE (%):13.0 | |
| Total Debt: Rs. 7.13 Cr | Promoter’s Holdings (%): 74.9 |
5. Bharat Earth Movers Limited (BEML)
The primary business of BEML is manufacturing a wide range of heavy earthmoving types of equipment. It is also involved in manufacturing railway and metro coaches. The company is also a leading defence equipment manufacturer and supplies the Indian Army and other defence forces. The company spends 4% of its revenue on research and development (R&D).Let’s look at the key financial ratios of Bharat Earth Movers Limited| Market Cap (Cr): Rs. 6,421 Cr. | Face Value: Rs. 10 | EPS: Rs. 36.7 |
| Book Value: Rs. 509 | ROCE (%): 4.55 | Debt to Equity: 0.34 |
| Stock PE: 41.9 | ROE (%): 3.08 | Dividend Yield (%): 0.39 |
| Total Debt (Cr): Rs. 728 | Promoter’s Holdings (%): 54.0 |
6. MTAR Technologies
MTAR is a recent listing in the Indian stock market. The company was established in 1970. It manufactures various machine equipment, assemblies, sub-assemblies, and spare parts for energy, nuclear, space, aerospace, defence and other engineering industries.The company generates 29% of revenues from its nuclear segment, 21% from the space and defence segment and 50% from the clean energy business. Let’s take a look at the key financial ratios of MTAR Technologies| Market Cap (Cr): Rs. 6,131 Cr. | Face Value: Rs. 10 | EPS: Rs. 19.2 |
| Book Value: Rs. 161 | ROCE (%): 19.2 | Debt to Equity: 0.11 |
| Stock PE: 104 | ROE (%): 13.1 | Dividend Yield (%): 0.15 |
| Total Debt (Cr): Rs. 55.0 | Promoter’s Holdings (%): 50.2 |
| Market Cap (Cr): Rs. 6,408 | Face Value: Rs. 10 | EPS: Rs. 35.2 |
|---|---|---|
| Book Value: Rs. 182 | ROCE (%): 22.8 % | Debt to Equity: 0.01 |
| Stock PE: 8.83 | ROE (%): 18.8 % | Dividend Yield (%): 2.31 % |
| Total Debt (Cr): Rs. 26.6 | Promoter’s Holdings (%): 84.83 |
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