Data Patterns, Midhani and Other Defence Stocks Rise Up to 6% as DAC Clears Acquisition Proposals Worth ₹1.1 Lakh Crore

Defence stocks opened higher on September 8 after the Defence Acquisition Council, chaired by Defence Minister Rajnath Singh, granted in-principle administrative approval on Monday to a set of acquisition proposals from the armed forces with an estimated cost of about ₹1.1 lakh crore. 

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Bharat Electronics was the best performer in the Nifty 50, up close to 2%. Across the Nifty India Defence index, most constituents traded in positive territory. Data Patterns (India), BEML, Axiscades Technologies, Paras Defence and Space Technologies and Hindustan Aeronautics gained between 3% and 6%. At 10:20 am, the index was up 2.5%, with Data Patterns, Midhani and Apollo Micro Systems out in front. 

The government has indicated that roughly 98% of the approved procurement will be sourced from Indian industry. ICICI Securities, in a note, reads the approvals as strengthening medium- to long-term order visibility for domestic defence manufacturers, with the heavy domestic sourcing requirement creating opportunities across platforms, electronics and critical systems. 

What was cleared 

The defence ministry's Monday approvals cover military hardware for all three services, including radars, advanced light helicopters and mechanical mine layers, with the stated aim of raising the military's overall combat capability. The DAC's Acceptance of Necessity, which is the in-principle administrative go-ahead, applies to proposals valued at approximately ₹1,10,000 crore. 

For the Indian Army, the council cleared procurement of Chemical Biological Radiological and Nuclear reconnaissance vehicles, high mobility vehicles, self-propelled mechanical mine layers, advanced light helicopters, trawl tanks and the Sarvatra bridge system. 

The CBRN recce vehicles will be able to detect, identify, monitor and mark areas contaminated with CBRN agents. The high mobility vehicles are expected to improve operational capability, logistic support and mobility in difficult terrain. The advanced light helicopters will carry out complex missions across all terrains and operational situations for both the Army and the Indian Air Force, while the trawl tanks and bridge system will give fighting formations composite crossing capability during operations in varied terrain. 

For the Indian Navy, AoN was granted for Arudhra radars and for the design, development and subsequent procurement of Marine Gas Turbines. The Arudhra radars will replace the existing Air Route surveillance radars at various Naval Air Stations. The Marine Gas Turbine, a warship propulsion system, is intended to cut reliance on foreign suppliers. 

For the Indian Air Force, the council approved a range of proposals to strengthen the war-fighting capability of its fighters, transport aircraft and helicopters. Approval was also given for the Ground-Based Multi-Purpose Jammer and for installing the Defence Forces Secure Access Card system. The jammer is designed to disrupt adversary radars effectively. 

Which companies stand to benefit 

Motilal Oswal Financial Services maps the approvals onto specific listed names. The CBRN reconnaissance vehicle proposal should benefit Bharat Forge and Bharat Electronics; Bharat Forge is also likely to gain from the marine gas turbine programme. The Sarvatra bridge system order is a positive for BEML. Among mid- and small-cap defence companies, the ground-based multi-purpose jammer approval for the Air Force is expected to lift Data Patterns and Astra Microwave Products in particular. 

A separate trigger came from Jefferies, which initiated coverage on Astra Microwave, Solar Industries and Bharat Dynamics with "buy" recommendations. Astra Microwave and Solar Industries rose close to 2%, while Bharat Dynamics gained more than 1%.