Mazagon Dock, GRSE Soar as DAC Approves Massive ₹1.44 Lakh Crore Deal! 

On September 4, defence stocks such as Hindustan Aeronautics (HAL), Bharat Dynamics, and Mazagon Dock gained attention after the Defence Acquisition Council (DAC) gave the green light to major procurement projects valued at ₹1,44,716 crore for the Indian Armed Forces.

Key projects include the acquisition of Future Ready Combat Vehicles (FRCVs) and Air Defence Fire Control Radars for the Army, alongside Dornier 228 aircraft, Next Generation Fast Patrol Vessels, and Offshore Patrol Vessels for the Indian Coast Guard.

Following this announcement, Mazagon Dock and Garden Reach Shipbuilders (GRSE) saw their stock prices rise by up to 1.5%, while HAL and Bharat Dynamics remained steady. Mishra Dhatu Nigam and Bharat Electronics Limited (BEL) were also trading positively.

Antique Broking has maintained a 'buy' recommendation for HAL, BEL, Bharat Dynamics, Mazagon Dock, and GRSE, highlighting that the majority of these defence projects will be sourced from domestic manufacturers. This development represents a significant growth opportunity for Indian defence companies.

The DAC, led by Defence Minister Rajnath Singh, approved these proposals worth ₹1.44 lakh crore to bolster the operational readiness of the Indian Armed Forces. The approvals include the procurement of FRCVs, which are expected to benefit companies like Bharat Forge, Mahindra Defence, and Tata Advanced Systems, and Air Defence Fire Control Radars, which would be advantageous for BEL. The acquisition of Dornier 228 aircraft will positively impact HAL, while the Next Generation Fast and Offshore Patrol Vessels will benefit Mazagon Dock, GRSE, and Cochin Shipyard.

Earlier in FY24, the government granted Acceptance of Necessity (AoN) for proposals worth ₹3.61 lakh crore under the Defence Acquisition Procedure (DAP)-2020, which emphasizes promoting domestic manufacturing. Antique Broking noted that the share of domestic procurement has risen significantly from 54% in FY19 to 75% in FY24 and is expected to grow further.

The DAC, one of the highest authorities for sanctioning major defence acquisitions, granted AoN for 10 capital acquisition proposals at its recent meeting. AoN is the first stage in the defence procurement process but does not guarantee a final order. Of the total approved AoN cost, 99% will come from indigenous sources, under the Buy (Indian) and Buy (Indian-Indigenously Designed Developed and Manufactured) categories.

The Indian Coast Guard is set to acquire three key assets, including additional Dornier 228 aircraft, Next Generation Fast Patrol Vessels capable of withstanding harsh weather, and Offshore Patrol Vessels with advanced technology and long-range operational capabilities.

The procurement of Future Ready Combat Vehicles (FRCVs) marks a significant step toward modernizing the Indian Army’s tank fleet. These new Main Battle Tanks will provide superior mobility, multi-layered protection, precision targeting, and real-time situational awareness, the Defence Ministry stated.

Antique Broking believes the recently approved projects, most of which will be sourced locally, offer substantial growth potential for Indian defence manufacturers like HAL, BEL, Mazagon Dock, GRSE, and other industry players. The firm maintained price targets of ₹6,145 for HAL, ₹381 for BEL, ₹1,579 for Bharat Dynamics, ₹5,486 for Mazagon Dock, and ₹2,092 for GRSE. It also issued a 'Hold' rating for Cochin Shipyard with a target price of ₹1,622.

Additionally, the Air Defence Fire Control Radars are expected to improve the Army’s ability to detect and track aerial threats, offering precise firing solutions. The proposal also includes equipment for Forward Repair Teams (Tracked) to provide mobility and in situ repair during mechanized operations, according to the Defence Ministry.