Defence stocks rally: HAL, Bharat Electronics, others surge up to 6% as MOD puts 108 items on import ban list

All the 108 items will now be procured from indigenous sources as per provisions given in Defence Acquisition Procedure (DAP) 2020

Bharat Electronics Ltd (BEL) share price jumped as high as 5.6 per cent to Rs 153.50 apiece in intraday on BSE. Other defence stocks such as Hindustan Aeronautics Ltd, Garden Reach Shipbuilders, Bharat Dynamics, Astra Microwave Products, BEML, Bharat Forge, Mishra Dhatu Nigam, and Mazagon Dock Shipbuilders were also trading higher. In the previous session, the Ministry of Defence (MOD) approved imposing restrictions on the import of 108 military weapons and systems such as next-generation corvettes, airborne early warning systems, tank engines and radars.

Hindustan Aeronautics Ltd and Garden Reach Shipbuilders & Engineers share prices surged 5 per cent, each, to Rs 1,069.15 and Rs 188.25, respectively. Similarly, Bharat Dynamics was up 4.5 per cent, Astra Microwave Products gained 4.4 per cent, BEML was up 1.7 per cent, Bharat Forge gained 1.3 per cent, Mishra Dhatu Nigam (MIDHANI) added 1.14 per cent, and Mazagon Dock Shipbuilders shares were up 1.6 per cent. In comparison, S&P BSE Sensex was trading flat at 51,965, after crossing 52,000 levels in intraday.

Defense companies get the bulk of their order and revenue from one customer, the government. “The decision that the Indian military will rely exclusively on indigenous vendors for defense equipment will help those companies like Bharat Electronics, HAL to get stability in the order book and predictability in cash flow,” Ashis Biswas, CapitalVia Global Research, told Financial Express Online. He added that this would help these companies to manage cash and project growth.

All the 108 items will now be procured from indigenous sources as per provisions given in Defence Acquisition Procedure (DAP) 2020. The first negative list for defence imports comprising 101 items was issued last year. “The Defence industry can gainfully utilise this golden opportunity to build robust Research and Development facilities, capacities and capabilities to meet the futuristic requirements of the Armed Forces. This list also provides an excellent opportunity for ‘start-ups’ as also MSMEs which will get tremendous boost from this initiative,” MOD said.

The ‘Second Positive Indigenisation List’ comprises complex systems, sensors, simulator, weapons and ammunitions like Helicopters, Next Generation Corvettes, Air Borne Early Warning and Control (AEW&C) systems, Tank Engines, Medium Power Radar for Mountains, MRSAM Weapon Systems and many more such items to fulfil the requirements of Indian Armed Forces. This second list is planned to be implemented progressively with effect from December 2021 to December 2025.

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