The defence sector has been an enigma for the stock markets. For one, the sector was monopolised by the public sector. Defence budgets were small. Capital and current account expenditure in absolute terms in early 2000 at $14 billion was one-fifth of the budget of $72 billion currently. Over the last 30 years defence spending as a percentage of GDP hovered between 2.5-3 per cent. There was not much spending. Thirdly, there were hardly any listed companies even after the sector was gradually liberalised. There were a few PSUs which were listed and actively traded. BEML and BEL were actively traded till 2017. BEL came into the limelight when the US imposed sanctions on the company in the wake of the nuclear test carried out by India in May 1998. Even in 2000, shares were traded for the better part of the year. Currently there are four more which have been added to the list of Central PSUs. Hindustan Aeronautics, Bharat Dynamics, Mishra Dhatu Nigam (Midhani) and Mazagon Dock Shipbuilders were listed in the last 4 years. HAL, BDL and Midhani were listed in 2018, while Mazagon Dock was listed during the Covid period in 2020. Bharat Electronics and BEML were good stocks and BEL had rewarded patient investors very well over the last two decades. Private sector – late starter It was only in the early 2000s that the private sector was allowed to operate in this sector. Initially, there was a lot of enthusiasm amongst the large players which had taken steps to get into this sector in a big way. While there were more than 300 licences issued, few really made it big. The hitch was that orders from the government were not forthcoming due to whatever reasons. There were a few PSUs which were listed and actively traded. BEML and BEL were actively traded till 2017. Of course, there were a few companies/groups in the private sector which were supplying goods and providing services in the private sector. But, as orders were not guaranteed, many of them started exporting defence goods and also setting up production centre overseas. L&T was one of the few companies which started providing warships to the Navy. It had built a warship design centre and to date has provided over 50 ships including offshore vessels and interceptor boats. It has designed and engineered complex navy platforms. It had even tied up with EADS, Europe’s aviation and defence group – with the European partner coming in at 26 per cent equity in a JV. It was reportedly one of the few to have made a prototype of a submarine but the orders did not come in within the expected timeframe. It had to be content with supplying underlying structures, military bases, platforms for facilitating mobility of vehicles, etc. Defence, however, formed a promising but very small part of its overall portfolio of products and services. This was the time when even large international companies were looking at tie-ups for existing shipyards and possibly getting some orders to build submarines. Tata has also been active in the defence sector through its various entities. Tata Motors has been supplying various trucks to the armed forces from as long ago as 1958. Whether ambulance support, mine-protected vehicles with gun holes on either side or other armoured vehicles to support troop movements or for medical supplies, Tata Motors has been a preferred supplier for the armed forces. Tata Advanced Systems Limited (TASL), a subsidiary of Tata Sons, is involved in providing strategic aerospace and defence solutions. Like other Indian groups, Tata Advanced has also inked JVs with several leading aerospace companies including, Boeing, Hela Systems of Israel and Sikorsky. This is, however, an unlisted entity.
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Mazagon Dock handed over the combat-ready 5th Scorpene Submarine, Vagir to the Navy
