New Delhi: when hThe exclusion of Industan Aeronautics Limited (HAL) from the Rafale deal raised questions on its capabilities and the deal was viewed by many as As a death knell for Indian Defense PSUs.
However, the company defied all expectations with its market capitalisation, or net worth, rising 280 per cent in the Indian stock market over the past five years.
In 2018, when the company was listed on the Indian stock market, it had a total market capitalization of $3.87 billion, which remained more or less the same till 2020.
By 2021, its market capitalization is projected to grow to $5.44 billion and almost double to $10.22 billion in 2022. In the first half of 2023 alone, its market cap has jumped to $14.76 billion – or about Rs 1.18 lakh crore (as of June 8, 2023) – a growth of 280%, almost all in the last two and a half years.
This is also reflected in the share prices of HAL. The price of a share of HAL has increased from Rs 998 on June 7, 2018 to Rs 3,489 on June 7, 2023 – a growth of nearly 250 per cent. In other words, if a person had invested Rs 1 lakh in HAL five years back, that investment would be worth Rs 3.49 lakh today.
For comparison, the BSE Sensex (an index of top 30 well-established companies) has gained nearly 78 per cent in the past five years.
And it’s not just HAL. Other major defense PSUs are also following this streak.
MazAegon Dock Shipbuilders, a marine engineering Public Sector Undertaking (PSU) which got listed on the stock market in 2020, has seen a rally in its share price since 2019. Rupees from 173 in October 2020 Rupees 1,030 in June 2023, a jump of nearly 500 per cent in prices. Rs 1 lakh invested in this company in 2020 will be worth Rs 6 lakh in 2023.
Similarly, Garden Reach Shipbuilders and Engineers invested Rs 1 lakh each Ltd. (GRSE), Another Marine Engineering company, in 2018, would be worth Rs 4.8 Lakh today. Invest Rs 1 Lakh in Bharat Earth Movers Limited in 2018 of India (BEML), which Manufactures heavy trucks and wagons, which would cost Rs 2.9 lakh today.
Read also: Modi government proposes to sell up to 3.5% stake in government company HAL through ‘offer for sale’
HAL as compared to PSU
BSE Sensex data shows that as of June 8, 2023, the market cap of HAL was Rs 1.18 lakh crore. This is almost three times the market value of Steel Authority of India Ltd or SAIL (Rs 34,700 crore), almost double In form of Punjab National Bank (Rs 57,200 crore), and nearly 1.5 times is that Bharat Petroleum (Rs 78,300 crore).
Even in big PSUs HAL doesn’t look so small. It is about 60 percent of the size of India’s Oil and Natural Gas Corporation (ONGC), about 80 percent of the size of Coal India Limited, and about 90 percent of the size of Indian Oil Corporation Limited.
In terms of market cap, HAL is also the largest defense PSU in India, followed by Bharat Electronics Limited (Rs 85,900 crore), Bharat Dynamics Limited (Rs 21,000 crore), Mazagon Dock Shipbuilders Limited (Rs 20,000 crore), BEML ( 6,260 crores). ), and GRSE (Rs 5,700 crore).
So how did it get so big?
One of the primary reasons for the rise in defense stock pricing is the increasing focus of the government on domestic manufacturing rather than imports.
The Ministry of Defense has come up with a number of negative import lists, which systematically restrict the import of a number of items. Over the next decade, India would manufacture all types of fighter aircraft, transport aircraft, specialized vehicles, artillery guns and small arms, along with tanks.,
The government has earmarked 75 per cent of the capital procurement budget of the armed forces for the domestic industry in this financial year, up from 68 per cent in 2022-23.
This means that the armed forces will have to give priority to Indian entities or joint ventures based here while placing orders for purchases. 75 per cent would translate to around Rs 1 lakh crore.
Over the next decade, orders worth about $100 billion are expected to be placed by the Indian military, most of which will go to Indian companies.
India has also started exporting defense equipment to more than 90 countries, and it is set to reach a record high of about Rs 16,000 crore in 2022-23.
HAL has also bagged major orders, which include 83 Tejas aircraft. According to media reports, it has an order pending of about Rs 83,000 crore and another order of about Rs 50,000 crore is in the pipeline.
Inputs from Snehesh Alex Philip
(Edited by Smriti Sinha)