Best Defence Stocks in India 2024

Investing in the defence sector offers unique opportunities to diversify a portfolio, with a focus on companies involved in producing and developing military equipment, Defence services, and aerospace technology. It is one of the sectors that is snowballing in the industry. 

In this article, you’ll learn more about the Defence sector and the best Defence stocks in India. So, let’s get started!

Defence Industry in India

The Indian Defence Sector is emerging as the 2nd largest armed force in the world, with the government’s view for ‘Atmanirbhar Bharat’ and Self Reliant India initiatives. These programs focus on the Defence and Aerospace Sector in India by establishing high-tech manufacturing infrastructures and an advanced research and development ecosystem. The Defence exports have reached an all-time high in FY 2023-24 with a turnover of $2.63 Billion.

In the final budget which was released on July 23rd 2024, the government has decided to allocate Rs.4,54,773 Crores for the modernization and infrastructure development of the defence systems and services. The Ministry of Defence has set a target turnover of Rs.1.75 Lakh Crore in the Defence manufacturing Sector by the end of the year 2025. 

The government has established two committed Defence Industrial corridors in the states of Uttar Pradesh and Tamil Nadu to increase the manufacturing capacity of defence equipment and services. Furthermore, the government has also brought in 2 new schemes such as iDEX (Innovations for Defence Excellence) and DTIS  (Defence Testing Infrastructure Scheme). These initiatives are expected to significantly enhance India's Defence capabilities and promote self-reliance in the sector.

List of Best Defence Stocks in India

Now that we've gone through the Indian Defence industry, let’s check out the best defence stocks in India:

Note: These best defence stocks ranking is based on market capitalisation. Please conduct a detailed analysis before investing. Metrics are recorded as of August 02, 2024, and may vary daily.

Best Defence Stocks in India - Overview

1. Hindustan Aeronautics Limited (HAL)

Hindustan Aeronautics Limited is a business entity that is engaged in the business of manufacturing and maintenance of aircraft and helicopters in India. It was established in 1940 and operates as a public-sector aerospace and defence company under the Ministry of Defence.

As of FY24 HAL has entered into joint ventures with 15+ Indian and foreign companies to innovate and develop their Defence systems and services. Their products and services sector include the manufacturing of aircraft, Civil Aviation vehicles, helicopters, space equipment, defence systems, and other MRO (Maintenance, Repair and Overhaul) activities.

2. Bharat Electronics Limited (BEL)

Bharat Electronics Limited was established in 1954 and is also given the Navarathna status by the Indian government. They hold expertise in a wide range of activities like designing, development, manufacturing, supply and life cycle support of strategic electronic products and systems.

In the defence segment, BEL has developed a variety of electronic equipment, systems and services. They operate at 9 manufacturing plants and 25 strategic business units in India. Their product expertise includes radar and fire control systems, weapon systems, communication, and anti-submarine warfare systems.

3. Mazagon Dock Shipbuilders Limited (MDSL)

Mazagon Dock Shipbuilders Ltd is one of India’s leading defence public sector undertakings, specializing in Ships and Submarine building under the Ministry of Defence. Incorporated in 1934. They specialize in the construction, repair and refurbishment of warships and submarines at their facilities in Mumbai and Nhava. 

MDSL was acquired by the Government of India in 1960 and ever since they have built a total of 802 vessels, including 28 warships ranging from advanced destroyer vehicles to missile boats as well as 7 submarines. As of FY23, the company has invested Rs. 96.52Cr into their research and development initiatives to enhance the efficiency of their facilities.

4. Cochin Shipyard Limited(CSL)

Cochin Shipyard Ltd was incorporated in the year 1972 and is one of the leading players in the construction, repairs and refits of all types of vessels. The company is majorly into Shipbuilding, Ship repair, and Marine Engineering. They operate mainly through 3 manufacturing facilities in Kochi, Howrah and Udupi.

CSL has produced and delivered close to 21 large vessels, 35 offshore support vehicles, 93 small and medium vessels and 31 defence vessels as of FY23. In the defence segment, the company is mainly involved in building aircraft carriers, fast patrol vessels, pollution control vessels and more. It has exported more than 45 ships to various clients outside India.  

5. Bharat Dynamics Limited (BDL)

Incorporated in the year 1970, Bharat Dynamics Ltd is an enterprise that works under the Ministry of Defence. BDL currently has three manufacturing units in India located in Hyderabad, Telangana, and Andhra Pradesh. They are additionally setting up facilities in 5 other states in the country.

In the defence segment, it is engaged in the manufacturing of guided missiles and allied defence equipment. BDL has taken up new initiatives to invest more in research and development to work on new product development and upgradation of the existing products. Their products include anti-tank-guided missiles, and surface-to-air missile weapons and also designed and developed a Counter Measure Dispensing System(CMDS) for the armed forces.

6. Garden Reach Shipbuilders & Engineers Limited (GRSE)

GRSE is a premier shipbuilding company that has modernized its infrastructure across 3 ship production locations in Kolkata. They have developed a shipyard which is equipped to construct 20 ships at the same time. GRSE is the first Indian shipyard to export warships and supply 100+ warships to the Indian Navy and Coast Guard.

GRSE is currently in the process of developing 3 warships building projects for Defence that are worth approximately Rs.25,000 crores. Their impressive product lineup includes Frigates, Missile Corvette, Landing Ship Tank, Survey Vessels, Patrol vessels and more.

7. BEML

BEML Ltd is a public sector undertaking company for the manufacturing of railway coaches, defence vehicles and other equipment for the government of India. Incorporated in the year 1964, the company has become a significant player in various sectors, including Railways and Metro, Defence, and International Exports.

In the defence and aerospace sector, the BEML received orders worth Rs. 4000 Crores in FY 23. They have also entered into MoUs with strategic partners for emerging defence and aerospace procurement opportunities. Their defence sector product line includes High Mobility trucks, bridge systems, tow tractors, and so on.  

8. Data Patterns (India) Ltd

Data Patterns Ltd is one of the fastest-growing companies in the Defence and Aerospace sector in India. It has been in the business for over 35 years, catering to the development of defence products.

The company was incorporated in the year 1998 and over the past 3 decades the company has manufactured electronic products used in Defence sectors like avionics, Automatic Test equipment, Radars, and electronic warfare solutions offering a comprehensive suite of projects to each industry. 

9. Paras Defence and Space Technologies Ltd

Paras Defence and Space Technologies Ltd is a private sector company that is primarily engaged in designing, developing, manufacturing and testing of variety of defence and space engineering products. 

The company has set up 3 research and development plants in India and also exports its products to 9 other countries in the world. As of FY 23, 55% of their revenue came from the Defence sector, 30% from the Private sector, and 15% from International Exports.

10. Astra Microwave Products Ltd

Astra Microwave Products Ltd is into the manufacturing of sub-systems for radio frequency and microwave systems used in defence, space, meteorology and telecommunications segments. 

It was incorporated in 1991 and has grown substantially in the past 30 years. The company has 3 production units and 2 research and development units in India. It is currently working with defence agencies to modernize their existing radars and AMCA fighter aircraft. The company has spent Rs. 35 Crores for research and development in FY24. 

Factors to Consider Before Investing in Defence Stocks in India

Now that we have a deep understanding of the best Defence stocks in India, let’s look at the things to consider before investing

Government Policy and Budget

The Annual budget and government policies can have a significant impact on the industry. Changes in the policies can affect government contracts and spending.

Geopolitical Environment

The rising global tensions can lead to an increase in defence spending and thereby affect the company’s contracts and the overall performance of the company.  

Company Fundamentals

Examine the financial statements of the defence companies analyzing the revenues, profit margins, debt and their cash flows.

Technological Advancements

As defence technology is rapidly evolving, the company one plans to invest in, must have good growth prospects and innovation.

Market Competitors

You must evaluate the company’s market position and its competitors before investing in some of the top defence stocks.

How to Invest in the Best Defence Stocks in India?

Now that we’ve understood the factors to consider before investing in defence stocks, let’s look at the steps to invest in them:

• Research and find out the top-performing Defence stocks in the market

• Evaluate and assess your risk appetite and fix your financial goals

• Shortlist the stocks based on your fundamental and technical analysis

• Open Demat account and trading account through a trusted stockbroker

• Invest in the shortlisted stocks and monitor them regularly

Conclusion

In conclusion, Investing in Defence stocks in India offers unique opportunities to diversify your portfolio. Focusing on companies that produce and develop military equipment, defence services and aerospace technology. The Indian government’s initiatives like ‘Atmanirbhar Bharat’ and substantial budget for modernization contribute to the sector's potential for significant growth. However, before investing in any stock, one must thoroughly research each stock and align your investments with your financial goals and risk tolerance.