Top Defence Stocks in India 2023

The Defence Industry comprises the commercial realm involved in the engineering, production, and upkeep of military infrastructure, equipment, materials, and even involving military veterans. The defence sector of India holds paramount importance not only for the nation’s well-being but also for its safeguarding.

In recent times, India has held the position of being the foremost purchaser of Defence Technology. Nevertheless, during the last several years, India has dedicated efforts towards diminishing its reliance on foreign defence imports, facilitated by initiatives such as “Make in India” and “Atmanirbhar Bharat.”

Through these programs, India aims to bolster its defence manufacturing sector and cultivate self-reliance, enabling it to effectively counter challenges posed by competitors. This direction was necessitated by escalating concerns regarding national security.

This article provides a comprehensive overview of India’s Defence industry, offers insights into key considerations when investing in Defence Stocks, and furnishes a list of prime Defence Stocks available for purchase in India. To delve deeper into this subject, continue perusing the article.

The Indian Defence Industry: An Overview

Following Russia’s incursion into Ukraine, India’s defence reserves have gained increased prominence. While the stock markets have remained entrenched in a bear market since the conclusion of the conflict, a select few Defence Stocks have bucked this trend by continuing to rise. This situation presents a potentially profitable opportunity for real-time investors in India.
Defying the ongoing market downturn, Defence Stocks have exhibited superior performance due to heightened defence expenditures in numerous other countries.

According to the Stockholm International Peace Research Institute (SIPRI), global military expenditure has shown an annual increase of 2.6% since 2019. This underscores the worldwide emphasis on defence, underscoring the significance of incorporating Defence Stocks into your portfolio in 2023.

Furthermore, several premier companies listed on the Indian stock market have earned considerable acclaim for their achievements within the defence sector. These companies constitute the leading stocks in the Defence Sector.

Factors considered for the selected Defence Stocks

Acknowledging the perpetual existence of the defence industry offers a pragmatic perspective. While the advancement of nuclear weaponry and contemporary artillery acts as a potent deterrent against resorting to military conflict for resolving disputes among nations, this doesn’t imply a constant state of impending warfare. To become a savvy investor in defence stocks, it’s crucial to comprehend a broad spectrum of diverse facets.

We have curated the following list of top defence stocks in India based on the following factors:

1. Market Cap

We have chosen only those defence stocks whose market cap is greater than 5000 Crore INR.

2. Price to Earning Ratio

The better a defence stock’s performance, the lower its price-to-earnings ratio tends to be.

3. Sales

We have selected defence companies with an Average Sales Growth (3 years) of more than 10%.

4.Profit

The following list consists of defence stock whose Average Profit growth (3 years) > 10%.

Top defence stocks to buy in India

Hindustan Aeronautics Ltd

Hindustan Aeronautics is actively involved in the business of Aircraft and Helicopter Manufacturing, as well as Aircraft and Helicopter Repair and Maintenance. It holds a critical position as a primary supplier of essential aviation equipment. HAL’s role in India’s defence program is of strategic significance, as it stands as the solitary Indian company with a specialized focus on aircraft manufacturing, along with the provision of associated maintenance services.

The company’s operations are closely tied to contracts from the Ministry of Defence (MoD), with its export earnings constituting approximately 1% of its overall revenue.A substantial portion of its total revenue, roughly 6% to 7%, is dedicated to Research and Development (R&D) endeavours on an annual basis. Additionally, HAL has augmented its R&D reserve from 10% to 15% of Profit After Tax (PAT) in the previous year, aiming to establish a robust R&D reserve to support its endeavours.

• Market Cap – ₹ 1,27,878 Cr.
• Current Price – ₹ 3,824
• High / Low – ₹ 3,999 / 2,174
• Stock P/E – 22.0
• ROE – 27.2 %

The company stands virtually free of debt and has shown an impressive compound annual profit growth of 23.9% over the last five years. Its consistent track record of a 26.7% Return on Equity (ROE) over three years highlights its solid financial performance. Additionally, the company maintains a healthy dividend payout ratio of 29.6%. Notably, it has significantly improved its operational efficiency by reducing working capital requirements from 98.4 days to 38.2 days. On the downside, the company’s sales growth has been modest, with a mere 7.77% increase over the past five years. The relatively low tax rate and a notable decrease of 18.3% in promoter holding over the previous three years are also areas of concern.

Elecon Engineering Company Ltd

• Market Cap – ₹ 8,890 Cr.
• Current Price – ₹ 792
• High / Low – ₹ 829 / 317
• Stock P/E – 33.2
• ROE – 20.5 %

The company has successfully diminished its debt load. The company maintains a nearly debt-free status. Promising expectations surround the company’s upcoming quarter performance. The company has achieved an impressive compound annual profit growth of 99.0% over the previous 5 years. Debtor days have notably enhanced, decreasing from 128 days to 82.5 days.

However, a drawback is that the company has exhibited a modest sales growth of only 5.32% over the last five years.

Praj Industries Ltd

Established in 1985 and headquartered in Pune, Praj Industries Ltd. has cultivated a worldwide presence, boasting over 750 acknowledgments spanning across more than 75 countries. What commenced as an ethanol plant supplier has since evolved into a global enterprise offering diverse solutions with a paramount emphasis on environmental sustainability, energy, and the agri-process sector.

Notably, it secured the second position in the roster of the world’s 50 most promising companies in the global bio-economy for 2021, particularly recognized within the Low Carbon Fuels and Renewable Chemicals category.

• Market Cap – ₹ 8,910 Cr.
• Current Price – ₹ 485
• High / Low – ₹ 494 / 299
• Stock P/E – 34.6
• ROE – 23.7 %

Graphite India Ltd

Graphite India Ltd primarily operates within the domain of producing and marketing graphite, carbon, and other associated products. The company’s core focus centers on manufacturing a comprehensive array of graphite electrodes, with an emphasis on high-margin, large-diameter, and ultra-high-power (UHP) electrodes.

Additionally, the company is involved in the production of Calcined Petroleum Coke (CPC), which finds application in electrode manufacturing. Another facet of its business involves the design, production, and provision of impervious graphite heat and mass transfer equipment, alongside comprehensive turnkey systems under its Impervious Graphite Equipment Division.

• Market Cap – ₹ 8,477 Cr.
• Current Price – ₹ 434
• High / Low – ₹ 472 / 252
• Stock P/E – 36.8
• ROE – 4.66 %

Cummins India Ltd

Cummins India Ltd operates as an integral part of the Cummins Inc. Group USA, specializing in the design, production, distribution, and maintenance of both diesel and alternative fuel engines spanning from 2.8 to 95 liters. The company also focuses on the manufacturing of diesel and alternative-fueled power generator sets reaching capacities of up to 3000 kW (3750 kVA), along with associated components and advanced technology.

Cummins’ Distribution Unit extends comprehensive sales, service, and support to its clientele throughout India. Boasting 21 authorized dealerships, over 120 dealership branch offices, and a network of more than 450 service touch points, the company’s adept employees possess the technical expertise and extensive experience necessary to deliver top-tier repairs, planned maintenance, and upgrade solutions. 

• Market Cap – ₹ 49,314 Cr.
• Current Price – ₹ 1,779
• High / Low – ₹ 1,981 / 1,125
• Stock P/E – 39.5
• ROE – 21.6 %

The company boasts a nearly debt-free status. Consistently, the company has upheld a robust dividend payout ratio of 62.2%.

The stock is currently trading at 9.04 times its book value. Over the past five years, the company has recorded lackluster sales growth, amounting to only 8.79%.

KSB Ltd

KSB Ltd engages in the production of a diverse selection of standard industrial pumps, including end suction and high-pressure multistage pumps, submersible motor pumps, and monoblock pumps, alongside other value-added components. These products cater to a wide spectrum of sectors such as agriculture, wastewater treatment, energy encompassing both nuclear and conventional power, as well as the oil and gas industries, among others.

The company provides an extensive portfolio of KSB pumps and valves that caters to various industries, effectively addressing the needs of clients involved in water management, energy production, agriculture, construction, oil and gas, as well as process industries.In addition to its product offerings, KSB Ltd extends services such as spare parts and training, ensuring efficient operation and maintenance of its pumps and valves.

• Market Cap – ₹ 9,047 Cr.
• Current Price – ₹ 2,599
• High / Low – ₹ 2,762 / 1,560
• Stock P/E – 45.6
• ROE – 16.9 %

Carborundum Universal Ltd

Carborundum Universal Ltd, affiliated with the Chennai-based Murugappa Group, specializes in the production of abrasives, ceramics, refractories, and electro-minerals. Within its product portfolio, the company crafts and disseminates both rigid and flexible abrasives, with its primary product segments encompassing Bonded Abrasives, Coated Abrasives, Metal Working Fluid, and Super Abrasives. Enjoying a dominant market share exceeding 30% in the bonded abrasives category, the company holds a prominent position within the Indian abrasives sector.

In the realm of Industrial Ceramics, the company extends advanced Ceramics offerings encompassing Alumina, Zirconia, Zirconia Toughened Alumina, and Silicon Carbide. These ceramics cater to diverse industries such as Power Generation and Distribution, Mining & Ore processing, Cement, Ferrous, Automotive, Battery, Glass, Paper, Food Grain handling, Petrochemicals, and Ceramic Tiles.

• Market Cap – ₹ 21,278 Cr.
• Current Price – ₹ 1,120
• High / Low – ₹ 1,305 / 766
• Stock P/E – 49.2
• ROE – 15.4 %

Ingersoll-Rand (India) Ltd

• Market Cap – ₹ 9,601 Cr.
• Current Price – ₹ 3,041
• High / Low – ₹ 3,221 / 1,681
• Stock P/E – 52.6
• ROE – 32.3 %

Jupiter Wagons Ltd

Commercial Engineers & Body Builders Company Ltd (CEBBCO) primarily engages in the manufacture of metal fabrications, encompassing load bodies for commercial vehicles, rail freight wagons, and associated components.

The company’s product range encompasses an array of offerings including Shipping containers, Skip-Loaders, Garbage-Bin Collectors, Troop Carrier Vehicle Bodies, Prison Van Bodies, Water Bowser Bodies, and more. These diverse solutions cater to a wide range of industries and sectors, spanning mining, road construction, goods transportation, solid waste management, municipal applications, and even the defence sector.

• Market Cap – ₹ 9,308 Cr.
• Current Price – ₹ 240
• High / Low – ₹ 257 / 57.0
• Stock P/E – 53.0
• ROE – 16.8 %

BEML Ltd

BEML Ltd engages in the production of an extensive array of heavy earthmoving equipment tailored to serve the mining and construction sectors, as well as crafting specialized vehicles for defence forces and contributing coaches to both the metro systems and the Indian Railways.

The company stands as a premier manufacturer of mining and construction equipment in India, presenting an all-encompassing assortment of machinery geared towards both open-cast and underground mining operations. Within its portfolio lie hydraulic excavators, bulldozers, wheel loaders, wheel dozers, dump trucks, motor graders, and tyre handlers, among other offerings.
With a robust marketing network, BEML encompasses 12 regional offices, 14 district offices, and 5 service centers across the nation.

• Market Cap – ₹ 8,378 Cr.
• Current Price – ₹ 2,012
• High / Low – ₹ 2,134 / 1,128
• Stock P/E – 53.1
• ROE – 6.61 %

FAQs

Is investing in defence stocks a viable option for long-term investment?

The defence sector holds a position of utmost significance, often regarded as a segment with enduring value. These stocks may be considered as potential perennial investments. However, it’s crucial to bear in mind that they can be subject to volatility and cyclical patterns, influenced by prevailing economic conditions.

List of Top defence stocks to buy in India

Conclusion

It’s important to acknowledge that the defence industry’s production of lethal goods might occasionally encompass covert funding operations or unsettling intelligence collection. Opting to invest in Defence Stocks might not align with your intentions if you wish to abstain from supporting such undertakings.

Comparable to various industries, Defence Stocks often exhibit slower momentum compared to biotech or technology stocks. Consequently, Defence Stocks are particularly well-suited for income-oriented investors who prioritize consistent dividend growth over abrupt price surges.

Author: Vedanti KiranVedanti is a female finance writer, currently pursuing her studies at Hansraj College. She has a passion for writing and travelling, and her articles on the stock market, finance, investment, and cryptocurrency are well-researched and informative. With her unique perspective on the world of finance, Vedanti is a go-to source for those seeking insights into the world of finance.