BEL, HAL, BDL, Solar, Paras Defence among potential beneficiaries of EU defence ramp-up

Elara Securities on Thursday said the $850 billion rearmament plan for European Union (EU) could potentially benefit Indian defence players such as Bharat Electronics Ltd (BEL), Hindustan Aeronautics Ltd (HAL), Bharat Dynamics Ltd (BDL) and Paras Defence, among others.

The EU expects its member nations to raise their defence spend by 1.5 per cent of GDP, which could result in 650 billion euro cumulatively for the next four years. It also announced a joint borrowing instrument for EU countries of 150 billion for ramping up defence capabilities.

"We believe defense companies in India stand to benefit as the EU defence original equipment manufacturers (OEM) turn to public and private defence firms to procure components and subsystems. Potential beneficiaries include Bharat Electronics, Hindustan Aeronautics, Bharat Dynamics, Data Patterns, Zen Technologies, Paras Defence, Solar Industries, Azad Engineering and Dynamatic Technologies," Elara Securities said.

Elara said countries such as Armenia and Azerbaijan spend up to 5 per cent of GDP due to regional conflicts. Poland, Serbia and Estonia spend in the range of 2-3 per cent. Companies like Bharat Dynamics, Solar Industries, Bharat Electronics have already supplied equipment and component to various countries including Armenia, it noted.

"Currently, the US, France and Armenia are the top three export countries for India; domestic companies to date have supplied weapons and equipment, such as the 155mm artillery guns, Akash air defence missile, Pinaka multi-launch rocket system, the BrahMos missile, artillery guns, Dornier-228 aircraft, radars, armored vehicles, fuselage and wings for aircraft & helicopters, bulletproof vests, night vision equipment and electronics," Elara said.

Exports accounted for 87 per cent of FY24 revenue of Azad Engineering. This company makes air foils, air frames and precision components. Exports accounted for 54 per cent of Dynamatic Technologies revenue. This company makes hydraulics for airplanes. Solar Industries, the maker of Pinaka, derived 40 per cent of its FY24 revenues from exports. Paras Defence (16 per cent), Zen Tech (19 per cent), BDL (7 per cent and BEL (4 per cent) and HAL (1 per cent) account for a lesser percentage of exports.

"Currently, the US, France and Armenia are the top three export countries for India; domestic companies to date have supplied weapons and equipment, such as the 155mm artillery guns, Akash air defence missile, Pinaka multi-launch rocket system, the BrahMos missile, artillery guns, Dornier-228 aircraft, radars, armored vehicles, fuselage and wings for aircraft & helicopters, bulletproof vests, night vision equipment and electronics," Elara noted.