Select defence equipment makers gain as Cabinet hikes FDI limit

Shares of seven defence equipment makers rose 0.09% to 3.2% at 11:45 IST on BSE after the Union Cabinet on Wednesday, 6 August 2014 reportedly approved raising the foreign direct investment limit in defence sector to 49% from 26%.

Bharat Electronics (up 1.32%), Taneja Aerospace (up 1.31%), Bharat Electronics (up 1.33%), Dynamatic Technologies (up 3.2%), Astra Microwave Products (up 1.45%), Walchandnagar Industries (up 0.09%) and BEML (up 0.51%) gained.

Centum Electronics (down 1.76%), Pipavav Defence and Offshore Engineering Company (down 1.14%), Mahindra & Mahindra (down 0.28%), Tata Power Company (down 0.37%), Bharat Forge (down 0.13%), L&T (down 0.11%) and Punj Lloyd (down 1.59%) declined.

Meanwhile, the S&P BSE Sensex was down 56.18 points or 0.22% at 25,609.09

As per reports, the Union Cabinet on Wednesday, 6 August 2014 approved raising the foreign direct investment limit (FDI) in defence sector to 49% from 26%, subject to the Indian owners exercising management control. The hike in FDI limit in defence is intended to cut imports by indigenising defence production as India is one of the world's largest arms importers, reports added.

Foreign investment in defence will be through the approval route, implying it will have to be cleared by the Foreign Investment Promotion Board (FIPB). Though the 49% cap will be general rule for the defence sector, 100% overseas ownership will be allowed in case the investments comes bundled with state of the art technology. Such investment proposals will have to be cleared by the Cabinet Committee on Security (CCS), reports added.

In Union Budget 2014-15 presented on 10 July 2014, finance minister Arun Jaitley had proposed raising the FDI cap in defence manufacturing to 49%.

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