Our recent industry interactions indicate Make in India focus in defence continues. Government companies have received orders worth $13 billion for navy equipment. Also, the defence ministry is focusing on pick-up in execution by resolving issues on projects stuck due to blacklisted vendors. We maintain BEL should benefit from these measures that boost indigenisation, apart from execution and easing working capital.
The Defence Acquisition Council (DAC) awarded two major contracts worth $13 billion, both to government companies. $8 billion is for seven 5,600-tonne frigates, of which four will be built by Mazagaon Dockyard in Mumbai and three by Garden Reach in Kolkata. Goa Shipyard will manufacture 12 minesweepers for $5 billion as part of the ‘Make in India’ campaign, and will float tenders to import technology and manufacture the vessels locally.
BEL is one of two shortlisted consortiums for the $8 billion Battlefield Management Systems and USD2 bn Tactical Communication Systems projects. Our industry interactions suggest that eventually the order will be split between the shortlisted consortiums, with the one selected getting a larger share. Assuming 25-30% of the order goes to the second consortium, it implies BEL should get orders at least worth $2 billion over the next 2-3 years.
By Jefferies