Defence stocks in focus; Data Patterns, GRSE, Zen, DCX rally up to 15%

Defence Secretary Rajesh Kumar Singh said relaxation in Foreign Direct Investment (FDI) policy and industrial licensing procedure will propel the growth in the defence industry

Shares of defence-related companies are in demand. They rallied by up to 15 per cent on the BSE in Wednesday’s intra-day trade amid heavy volumes after Defence Secretary Rajesh Kumar Singh said relaxation in Foreign Direct Investment (FDI) policy and industrial licensing procedure will propel growth in the industry.

 

Singh announced that the current defence budget of Rs 6.21 trillion is projected to rise by 9.5 per cent to Rs 6.81 trillion in 2025-26. He stressed the need for spending $30 billion annually over the next decade for the modernisation of India's defence forces. Of the total capital expenditure, 75 per cent is meant for domestic procurement, while the rest 25 per cent is for the private sector.

 

DCX Systems, Zen Technologies, Data Patterns (India), Garden Reach Shipbuilders & Engineers (GRSE), Mazagon Dock Shipbuilders (MDL), Tejas Networks, MTAR Technologies, Bharat Dynamics and Astra Microwave Products, were up in the range of 4 per cent to 11 per cent on the BSE. In comparison, the BSE Sensex was down 0.04 per cent at close. Most of these stocks have corrected by up to 60 per cent from their respective 52-week highs on concerns of a slowdown in order inflows, due to delays in the finalisation of tenders.

 

The Union Budget 2025 points to the government's commitment to strengthening the defence sector, with a record allocation of over Rs 6.81 trillion for the Ministry of Defence, marking a 9.53 per cent increase from FY25. This includes a substantial Rs 1.80 trillion earmarked under the Capital Budget of the Armed Forces, providing significant tailwinds for the industry. 

 

Defence capital outlay budgeted for FY26 stands at Rs 1.8 trillion (13 per cent increase over FY25 revised estimate). The government acknowledges that there is a need to increase the defence capital outlay substantially, considering the requirement for more modernised platforms (including fighter aircraft, helicopters, missiles, warships, submarines, unmanned vehicles, drones, and tanks). Annual capex of $30 billion (Rs 2.5 trillion) implies a 40 per cent increase over FY26, ICICI Securities said in a note. Among the individual stocks, GRSE soared 15 per cent to Rs 1,404.50 on the BSE in intra-day trade. It ended the day at Rs 1,351.80, up 10.59 per cent. The stock of the state-owned defence company had tanked 57 per cent from its 52-week high of Rs 2,834.60, touched on July 5, 2024.

 

Shares of Data Pattern India were trading at Rs 1,602, bouncing back 14 per cent from a 52-week low of Rs 1,405.35 touched in intra-day trade on Wednesday. The stock plunged 62 per cent from its 52-week high level of Rs 3,654.75 on July 5, 2024. It ended the day up 8.51 per cent at Rs 1,544.85.

 

The company said it anticipated a major ramp-up in the fourth quarter of the financial year 2024-25 (January to March) and remains confident of achieving 20 per cent to 25 per cent revenue growth in FY25 while maintaining strong earnings before interest, tax, depreciation and amortisation (Ebitda) margins at 35 per cent to 40 per cent. In the third quarter (Q3FY25), the export market drove substantial revenue and order inflow. With a robust bidding pipeline, the company targets Rs 2,000 crore to Rs 3,000 crore in new orders over the next 18 months.