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Best Defence Stocks in India in January 2025 – 5yr CAGR Basis; Includes HAL, BDL & More

Updated on: Dec 28, 2024, 7:55 AM IST
Explore the top defence stocks in India for January 2025, including Hindustan Aeronautics Ltd and Bharat Dynamics Ltd, based on 5-year CAGR and check the sector growth.
Best Defence Stocks in India in January 2025 – 5yr CAGR Basis; Includes HAL, BDL & More
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The defence sector plays a crucial role in the economic and strategic landscape of any nation, and India is no exception. With a growing focus on modernisation and self-reliance, the Indian defence industry has witnessed significant growth and investment in recent years. In FY 2023-24, India’s defence exports reached US$ 2.63 billion, reflecting a 32.5% increase from the previous year. As India continues to strengthen its defence capabilities, several defence stocks have emerged as strong contenders in the market. In this article, check the best defence stocks in India for January 2025, based on 5-yr CAGR. Also, learn about the growth of the defence sector in India, and the pros and cons of investing in them.

Best Defence Stocks in India in January 2025 – 5yr CAGR Basis

Name Market Cap (₹ in crore) PE Ratio 5Y CAGR (%) 1Y Return (%)
Taneja Aerospace and Aviation Ltd 1,116.71 100.33 82.18 21.01
Sika Interplant Systems Ltd 1,111.88 57.43 69.41 84.13
Hindustan Aeronautics Ltd 2,82,237.32 37.03 63.75 49.48
Bharat Dynamics Ltd 44,565.06 72.73 53.67 43.33

Note: The list of defence stocks in India given here is as of December 26, 2024. The stocks are of market cap above ₹1,000 crore and sorted based on 5-yr CAGR.

Overview of the Best Defence Stocks in India in January 2025

1. Taneja Aerospace and Aviation Ltd

Taneja Aerospace & Aviation Ltd, established in 1994, is a key player in the aviation industry, specialising in the manufacture and sale of parts and components. The company also offers services related to airfields, MRO (Maintenance, Repair, and Overhaul), and other allied services. Based in Pune, it is a part of the Indian Seamless group. In the half year ended September 30, 2024, the company reported a total income of ₹1,973.14 lakh, up from ₹1,492.13 lakh during the same period in the previous year. The Profit After Tax (PAT) was ₹755.78 lakh, up from ₹610.61 lakh during the same period in 2023.

Key Metrics: 

  • ROE: 9.28%
  • ROCE: 11.28%

2. Sika Interplant Systems Ltd

Sika Interplant Systems Ltd is an engineering-driven company that focuses on offering products, systems and services to the Defence & Space, Aerospace, and Automotive sectors in India. In the half year ended September 30, 2024, the company reported a total income of ₹6,610.77 lakh, up from ₹4,571.75 lakh during the same period in the previous year. The PAT was ₹1,082.87 lakh, up from ₹858.49 lakh during the same period in 2023.

Key Metrics: 

  • ROE: 20.47%
  • ROCE: 24.01%

3. Hindustan Aeronautics Ltd

Hindustan Aeronautics is involved in the business of manufacturing aircraft and helicopters and its repair and maintenance. In October 2024, the company was granted “Maharatna” status by the Department of Public Enterprises, Ministry of Finance, Government of India. In the half year ended September 30, 2024, the company reported a total income of ₹11,60,255 lakh, up from ₹10,43,036 lakh during the same period in the previous year. The PAT was ₹2,94,763 lakh, up from ₹2,05,076 lakh during the same period in 2023.

Key Metrics: 

  • ROE: 28.91%
  • ROCE: 24.58%

4. Bharat Dynamics Ltd

Bharat Dynamics (BDL) is a Government of India company. It is involved in the manufacturing of guided missiles and allied defence equipment. In the half year ended September 30, 2024, the company reported a revenue from operations of ₹735.9 crore, down from ₹913.5 crore during the same period in the previous year. The PAT was ₹129.8 crore, dropping from ₹188.9 crore during the same period in 2023.

Key Metrics: 

  • ROE: 17.89%
  • ROCE: 11.34%

Growth of India’s Defence Sector

India’s defence sector has experienced significant growth in recent years, driven by increasing government investments, technological advancements, and a focus on self-reliance. The Indian government recognises the strategic importance of a robust defence industry, which has led to substantial budget allocations and growth targets for the sector.

In FY 2023-24, India’s defence exports reached US$ 2.63 billion (~₹21,800 crore), reflecting a 32.5% increase from the previous year. This growth in defence exports highlights the country’s growing reputation as a global player in the defence market. The Indian government has set an ambitious target of achieving annual defence exports worth US$ 6.02 billion (₹50,000 crore) by FY 2028-29.

India’s defence production value for FY 2023-24 stood at ₹1,26,887 crore (US$ 15.3 billion), with Public Sector Undertakings (PSUs) contributing ₹73,945 crore (US$ 8.93 billion).

In the FY 2025 Union Budget, the Ministry of Defence (MoD) was allocated ₹6,21,940.85 crore (~US$ 75 billion), the highest allocation among all government ministries. This allocation underscores the priority given to strengthening India’s defence infrastructure and capabilities.

Pros of Investing in the Defence Sector

  • Government Support: The Indian government prioritises defence, with increasing budget allocations and a focus on self-reliance through initiatives like “Atmanirbhar Bharat.” This ensures long-term demand and growth prospects for the sector.
  • Stable Demand: National security needs and global geopolitical tensions ensure continuous demand for defence products and services.
  • Export Growth: India’s defence exports are increasing steadily, with a target of US$ 6.02 billion by 2028-29, providing companies with opportunities for expansion into international markets.
  • Technological Advancements: The sector is undergoing rapid modernisation, with significant investments in cutting-edge technologies like drones, cyber defence, and advanced missile systems.
  • Market Size: India has the world’s fourth-largest defence expenditure, creating a sizable domestic market for defence companies to tap into.

Cons of Investing in the Defence Sector

  • High Regulation and Bureaucracy: The defence sector is heavily regulated, with long approval processes for defence contracts and government policies.
  • Geopolitical Risks: Global political instability, changing defence priorities, and security concerns can lead to fluctuations in demand, impacting company performance.
  • Risk of Dependence on Government Contracts: Many defence companies rely heavily on government contracts.

Conclusion

Apart from the mentioned stocks, there are several other stocks like Paras Defence and Space Technologies LtdData Patterns (India) LtdideaForge Technology Ltd, etc. Before investing in any stock understand the business of the company, their financials and future prospects.

 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.

Published on: Dec 28, 2024, 7:55 AM IST

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