Paras Defence, HAL to Bharat Dynamics: Defence stocks rally as DAC okays acquisition worth ₹21,772 crore

Defence stocks including Garden Reach Shipbuilders, Hindustan Aeronautics (HAL), Paras Defence, Cochin Shipyard, among others rallied up to 6% on Wednesday, after the government approved five capital acquisition proposals worth ₹21,772 crore to improve the country’s defence preparedness.

Garden Reach Shipbuilders & Engineers share price led the rally with gains of 6.2%, Paras Defence and Space Technologies shares surged as much as 4.6%, HAL stock price rose 2.4%, Bharat Dynamics shares rallied 3.5%, while Bharat Electronics and Cochin Shipyard shares gained 2% each.

The Defence Acquisition Council (DAC), under the chairmanship Defence Minister Rajnath Singh accorded Acceptance of Necessity (AoN) for 5 capital acquisition proposals amounting to over ₹21,772 crores on Tuesday.

According to the statement from the Ministry of Defence, the DAC gave AoN for the procurement of 31 new water jet fast attack crafts (NWJFACs) for the Indian Navy.

DAC also granted AoN for procurement of 120 fast interceptor craft (FIC-1). AoN for procurement of electronic warfare suite (EWS) comprising external airborne self protection jammer pods, next generation radar warning receiver and associated equipment for Su-30 MKI aircraft was accorded by DAC.

DAC also approved procurement of 6 advanced light helicopters (ALH) M (MR) for Indian Coast Guard to strengthen the coastal security and surveillance in the coastal areas.

It has also accorded approval for the overhaul of T-72 & T-90 tanks, BMP- and engines of Sukhoi fighter aircraft which will enhance the service life of these assets, the release said.

Key beneficiaries

Among defence companies, ICICI Securities believe Bharat Electronics to benefit the most due to direct benefit from EWS for Su-30MK-I and share from almost all the other proposals while Astra Microwave is likely to benefit from trickle-down effect. 

The proposals pertaining to shipbuilding are for smaller vessels and shall receive bids from both private companies and Defence PSUs.

Defence stocks to buy

Ganesh Dongre, Senior Manager - Technical Research at Anand Rathi has recommended three defence stocks to buy which he believes can give decent returns going ahead. These three defence stocks to buy are Hindustan Aeronautics, Garden Reach Shipbuilders & Engineers and Bharat Dynamics. Here are the details:

> Hindustan Aeronautics | Buy | Target Price: ₹4,900 | Stop Loss: ₹4,200

> Garden Reach Shipbuilders & Engineers | Buy | Target Price: ₹2,000 - 2,010 | Stop Loss: ₹1,600

> Bharat Dynamics | Buy | Target Price: ₹1,350 | Stop Loss: ₹1,100

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.