The global military spending accounts for 2% of the world’s global GDP with the biggest spenders being United States, China, Saudi Arabia, India and France. India’s military spending has been rising for the last decade or so on the back of new policies promulgated by the government such as the new Defence Procurement Policy, opening up of Foreign Direct Investment and allowing single vendor participation for tenders. The government is outlining policies to convert India into a defence hub with indigenous manufacturing being given the highest priority. Defence exports have been tweaked to enable more foreign original equipment manufacturers to set up ventures in India with projects executed through government-to-government and partnerships between Indian companies and foreign original equipment manufacturers. The major focus is on fast track deals and tailored project partnerships involving micro, small, and medium enterprises. Hence, the thrust is on indigenization—making India achieve self-reliance in defence products manufacturing. Indian Defence exports accounts to Rs 10,745 crore in 2018-19, up from Rs 4,682 crore in 2017-18 with the industry doubling its defence exports in the last three years.
There have been recent reports that the Department of Investment and Public Asset Management (DIPAM) will put 15% of government stake on sale in the Defence PSU Bharat Dynamics Ltd under the Offer for Sale (OFS) route. The government intends to disinvest 15% paid up equity capital of Bharat Dynamics Ltd out of its shareholding of 87.75% during the current fiscal. This will create liquidity of the stock in the market and foreign investors can participate in the purchase from the stock exchanges. DIPAM is trying to end the current fiscal with at least a visible revenue generation and OFS is the quickest way to do it. Till date, the disinvestment proceeds have only Rs 18,094 crore against a tall order target of Rs 1.05 lakh crore. Bharat Dynamics Ltd is a Governmnt of India enterprise under the Ministry of Defence to act as a manufacturing base for guided missiles and allied defence equipment. It is among the few industries in the world having capabilities to produce state-of-the-art guided weapon systems. The company is poised to enter new avenues of manufacturing, covering a wide range of weapons systems such as Surface-to-Air Missiles, Defence Systems, Torpedoes, Air-to-Air missiles, making it a world class defence equipment manufacturer. Bharat Dynamics Ltd stock is currently quoting at Rs 305 on the Indian bourses and is a good portfolio investment for a 30% price appreciation in the next one year time frame.
Rajiv Kapoor is a share broker, certified mutual fund expert and MDRT insurance agent.