HAL, Mazagon, Cochin Shipyard, BDL, GRSE: Defence PSU shares surge after DAC’s ₹1.45 trillion capital allocation

Defence Stocks: The stocks of the defence public sector units (PSUs), including Bharat Dynamics (BDL) (2.2%), Mazagon Dock Shipbuilders (5.51%), Garden Reach Shipbuilders & Engineers (GRSE) (2.45%), and Cochin Shipyard (3.07%) on September 4 witnessed an uptick, fueled by the government's substantial increase in capital allocation for these companies. Taking a cue from the government's fresh capital allocation of ₹1.45 trillion for the defence PSUs, Hindustan Aeronautics Limited (1.52%) and Paras Defence and Space Technologies (2.06%) share prices also surged.

Why are defence stocks gaining today?

The Defence Acquisition Council (DAC), the top authority for approving key acquisition proposals for the Armed Forces, approved the Acceptance of Necessity (AoN) for these capital acquisition proposals at its meeting on Tuesday. The move aligns with the government's push for self-reliance in defence manufacturing under the "Aatmanirbhar Bharat" initiative, an official statement said.

The government had in the union budget FY24-25 accorded Acceptance of Necessity (AoN) to proposals worth approximately ₹3.61 trillion under various categories of capital procurement, which promotes domestic manufacturing .

The approved proposals include the procurement of Future Ready Combat Vehicles (FRCVs) to modernize the Indian Army's tank fleet. These vehicles have "superior mobility, all-terrain ability, multilayered protections, precision and lethal firepower, and real-time situational awareness."

Additionally, the DAC approved the acquisition of Air Defence Fire Control Radars and Forward Repair Teams. The purpose is to conduct repairs during mechanised operations.

For the fiscal year 2024-25, the government has approved a total budget of ₹6,21,941 crore for the Ministry of Defence. Of this, ₹1.72 lakh crore was allocated for capital acquisition and ₹92,088 crore for sustenance and operational readiness.

In related news, Bharat Dynamics Limited (BDL) announced that the Ministry of Defence has extended the additional charge of the post of Director (Finance) to Cmde. A. Madhavarao, CMD, BDL for another six months, from August 1, 2024, to January 31, 2025, or until a regular incumbent is appointed.

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