India's Defence psus record pick up in sales 

Similarly, other companies such as Cochin Shipyard delivered a 16 per cent growth in sales, followed by Bharat Dynamics (26 per cent).

Published: 07th March 2019 08:52 AM  |   Last Updated: 07th March 2019 08:52 AM   |  A+A-

HAL’s Light Combat Helicopters, which were displayed at the air show in Bengaluru, are close to being inducted into the Indian Air Force and could add significant traction to HAL’s sales performance | Vinod Kumar T

Express News Service

India’s defence sector seems to be picking itself up from a slump if the third quarter’s results are any indication, with the Street’s apprehensions about the growth and margin pressure on defence firms now reversing.  To be sure, the recent financial performance of defence public sector undertakings (PSUs) has been encouraging. As against a mere two per cent year-on-year (YoY) growth in sales in the June quarter, financial results of eight PSUs in the defence sector show an aggregate 12 per cent spurt in sales in the third quarter.

In the subsequent quarters too, analysts say, the trend looks favourable backed by a healthy order book providing revenue visibility and increasing emphasis on execution in the light of recent geopolitical uncertainty. With most companies expanding capacities in the recent past with the hope of increasing project sizes at home and opportunities overseas, the next few quarters are also expected to see higher earnings growth. 

Garden Reach Shipbuilders and Engineers (GRSE), one of the prominent PSUs in the sector, has reported a whopping 116 per cent sales growth during the third quarter due to approval of its finished inventory which allowed the company to book more revenue. The miniratna defence PSU is also set to launch its 99th and 100th warship in March and April this year, respectively. 

Similarly, other companies such as Cochin Shipyard delivered a 16 per cent growth in sales, followed by Bharat Dynamics (26 per cent). For Bharat Dynamics, recent capacity expansions, the increasing size of projects and investment in value-added products is helping it scale up faster. But, aerospace major Hindustan Aeronautics Limited (HAL) reported a de-growth in sales, largely due to the cascading effect of payment delays over the last few quarters, while Bharat Electronics Limited (BEL) reported a muted growth. BEL, however, has largely benefited because of the EVM machine project ahead of elections.

Companies also seem set to capitalise on the government’s intent to increase domestic procurements in the defence sector. Currently, the order book position of HAL is full, while BEL’s current order backlog is `48,402 crore (5x FY18 sales), which experts say provides strong visibility for the next three years. The unexecuted order book reached an all-time high in FY19 after it bagged a `9,200 crore order for the supply of seven long-range surface-to-air missiles. 

“Although competition from the private sector is likely to intensify in the medium term, BEL’s established track record, high dependence on defence orders and its new JV and technology tie-ups are expected to augur well for the company’s future growth,” ICRA noted.

Stay up to date on all the latest Delhi news with The New Indian Express App. Download now
(Get the news that matters from New Indian Express on WhatsApp. Click this link and hit 'Click to Subscribe'. Follow the instructions after that.)

Comments

Disclaimer : We respect your thoughts and views! But we need to be judicious while moderating your comments. All the comments will be moderated by the newindianexpress.com editorial. Abstain from posting comments that are obscene, defamatory or inflammatory, and do not indulge in personal attacks. Try to avoid outside hyperlinks inside the comment. Help us delete comments that do not follow these guidelines.

The views expressed in comments published on newindianexpress.com are those of the comment writers alone. They do not represent the views or opinions of newindianexpress.com or its staff, nor do they represent the views or opinions of The New Indian Express Group, or any entity of, or affiliated with, The New Indian Express Group. newindianexpress.com reserves the right to take any or all comments down at any time.

flipboard facebook twitter whatsapp