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In the last week of FY23, the Ministry of Defence (MoD) has approved a number of orders, benefitting PSUs such as BEL, BDL, GRSE, Cochin Shipyard and Goa Shipyard. Most of these orders are under the Indian-IDMM category, in line with the government’s focus on indigenisation, hence, we expect consequential benefits for downstream companies in radars, instrumentation and surveillance systems such as BEL and Data Patterns. The orders comprise the much-awaited backlog for BDL, BEL and Shipyards. In our view, the primary beneficiary (among coverage companies) is likely to be BEL with direct orders of Rs118.3bn and consequential benefits from Akash 3rd and
4 th regiments and Next Generation Offshore Patrol Vessels (NGOPV) for Goa Shipyard/GRSE. Hence, we expect BEL to record Rs200bn of order inflow for FY23. With the awarding of Akash 3rd and 4th regiment orders, we believe that a key market expectation for BDL has also been met. In case of Shipyards, we see the awarding of NGOPV as a respite for both GRSE and Goa Shipyard (also benefitting its HOLDCO- MDL) as delivery is expected from Sep,‘2026. We maintain BEL (BUY; TP: Rs125) as our top pick in the space. Taking cognisance of better earnings outlook for BDL, we revise its TP to Rs1,175 on DCF valuation (earlier: Rs955) [Refer tables 2, 3]. We revise BDL’s recommendation to BUY (earlier Add). The companies Cochin Shipyard, Goa Shipyard and Data Patterns are NOT RATED.

* Significant order inflow with focus on indigenisation: In the past one week, MoD has placed orders worth Rs442.4bn, mainly under the Indian-IDMM category, thus, benefitting the entire domestic supply chain and boosting indigenisation efforts of the government. Key points: 1) Akash 3rd and 4th regiment orders worth Rs81.6bn placed on BDL have an overall indigenous content of 82% which will be increased to 93% by FY27; 2) awarding of NGPOV and Next Generation Missile Vessels (NGMV) contracts will generate the employment of 11mn man-days over a period of seven and half years and 4.5mn man-days over a period of nine years; 3) awarding of orders worth Rs97.8bn on GRSE and Goa Shipyard partially addresses cash accretion concerns beyond FY26; 4) BEL has received cumulative award of Rs118.3bn worth of orders in the past one week with additional opportunities from Akash 3rd and 4th regiment (pegged at Rs30-40bn) and orders for NGOPVs and NGMVs; and 5) these orders are also likely to ensure that expenditure by Indian Navy and Indian Army is in line with the allocated amount for FY23.

* BEL likely to be the primary beneficiary of the current round of ordering: The orders placed by the MoD in the past one week are likely to benefit BEL the most, in our view. We believe the street’s concerns around the orderbook of BEL languishing at two-year low level in Q3FY23 may be assuaged considerably as direct and consequential benefits are likely to ensure order inflow of Rs200bn in FY23. Furthermore, these orders are expected to be the key enabler in BEL maintaining its revenue growth of 15% p.a. over the next few years. In case of BDL, a key overhang of the delay in ordering of Akash Weapon System (AWS) 3rd and 4th regiment has been removed. We believe that with MRSAM, AMOGHA-III and HELINA/NAG orders likely in H1FY24, orderbook may double from the current level of Rs117bn and the revenue guidance of Rs38bn for FY24 is achievable.

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