What Does The Defence Sector Expect From Budget 2024? | Union Budget Expectations

Summary

In this episode of 'Budget Trade' on NDTV Profit, host Samina Nala discusses India's defense sector, focusing on the impact of Defense Minister Rajat Singh's plans to enhance domestic manufacturing and exports. The show highlights the sector's growth, with defense stocks soaring and the interim budget for FY 2024-25 allocating a significant 13% of total expenditure. Expert opinions on the potential benefits of increased R&D incentives, collaboration between public and private sectors, and the focus on exporting complete defense platforms are shared, suggesting a promising future for India's defense industry.

Takeaways

• 📈 Defense stocks have seen increased investor interest due to ambitious plans to boost India's defense exports and strengthen domestic manufacturing under the Make in India initiative.
• 💰 India is the fourth highest defense spending country, with the interim budget for FY 2024-25 allocating 6.21 lakh crores to defense out of a total budget of 47.66 lakh crores.
• 🔍 The final budget for FY 2024-25, expected on July 23, will provide a clearer picture of India's defense priorities.
• 📊 The Nifty defense index currently has an order book of 2.87 lakh crores, showing strong future potential.
• 🚢 Defense stocks like Garden Reach, Cochin Shipyard, Mazagon Dock, and others have shown significant gains in the past year, with returns as high as 198%.
• 🔧 Key themes for the future include indigenization, increased defense exports, and higher government contracts for military equipment.
• 🌍 India's defense exports aim to reach 50,000 crores by FY 2028-29, a significant increase from the current 21,000 crores.
• 💡 The government is focusing on policies to support local defense manufacturing, R&D, and collaboration between public and private sectors.
• 🚀 Private sector involvement in R&D and technology development is expected to increase, driven by initiatives like the Technology Development Fund.
• 📉 Despite the recent rally in defense stocks, experts believe there is still potential for growth, especially for companies involved in advanced defense equipment and technology services.

Q & A

What is the current focus of the Indian defense sector according to the script?

The current focus of the Indian defense sector is on boosting defense exports and strengthening domestic manufacturing under the 'Make in India' initiative, as outlined by Defense Minister Rajat Singh.

What is India's ranking in terms of defense spending?

India stands fourth in the rankings of the highest defense spending countries, following the US, China, and Russia.

What was the defense share and budget allocation in the interim budget for FY 2024-25?

The defense share and budget allocation in the interim budget for FY 2024-25 stood at 13%, amounting to 6.21 lakh crores out of a total budget of 47.66 lakh crores.

When is the full budget for FY 2024-25 expected to be provided?

The full budgetary picture for FY 2024-25 is expected on the 23rd of July.

What is the current order book value of the Nifty defense index?

The current order book value of the Nifty defense index stands at 2.87 lakh rupees.

How have defense stocks performed in terms of investor wealth creation over the last one year and one month?

Defense stocks have seen significant gains, with companies like HAL and BML experiencing year-to-date returns of 99% and 83% respectively, and even higher returns in the last one month.

What is the growth trend in defense budget allocation over the years?

There has been a significant jump in defense budget allocation, with an 18.3% growth from FY 21 to 22 to the interim budget of FY 24 to 25.

What are the key themes in focus for the defense sector in the upcoming budget?

The key themes in focus include indigenization, localization of production to benefit domestic manufacturers, defense exports, and higher government contracts for acquiring new military equipment.

What is the current status of defense exports according to the script?

Defense exports have jumped to about 50,000 CR, with a plan to increase this number by FY 2028-29, representing a 3X jump from the FY 21 level.

What are the expectations from the defense budget in terms of R&D and private sector involvement?

There is an expectation for more government incentives and reforms to support the growth of the 'Make in India' theme, including a push towards privatization of R&D in defense technologies and collaboration between DPSUs and private industries.

How do the experts suggest the defense sector can compete more efficiently in the global market?

Experts suggest that the focus should be on exporting complete platforms rather than components, and that the government should encourage R&D and provide incentives for the private sector to develop advanced defense technologies.

Outlines

00:00

🚀 Defense Stocks and India's Make in India Initiative

The video script opens with a discussion on defense stocks in India, focusing on the impact of the defense minister Rajat Singh's plans to increase defense exports and domestic manufacturing under the Make in India initiative. India's ranking as the fourth highest spender in defense is highlighted, along with the interim budget allocation for FY 2024-25, which stands at 13% of the total budget. The script also mentions the anticipation of the full budget on July 23rd and the current order book value of the Nifty defense index. The segment ends with a preview of the defense minister's ambitious plans for capital outlay and a discussion on the performance and expectations of defense stocks.

05:02

📈 Growth and Expectations of the Defense Sector

This paragraph delves into the performance of defense stocks, noting significant gains over the past year and the last month. It outlines the growth in defense spending from previous years to the current interim budget, highlighting an 18.3% increase. The focus on indigenization and the Make in India theme is emphasized, with a mention of the defense minister's comments on the growth of defense manufacturing. The paragraph also discusses the defense export target set by Rajat Singh and the potential policy initiatives to support this growth. Lastly, it touches on the importance of higher government contracts for new military equipment and the benefits to listed companies with substantial order books.

10:03

🌐 Geopolitical Impacts and Defense Sector Growth

The conversation with Amit Mahajan, Director of Faris Defense, explores the defense sector's potential for growth, influenced by geopolitical scenarios and the need for India to be self-reliant in critical defense technologies. Mahajan emphasizes the importance of R&D and the role of the private sector in developing defense technologies, suggesting that incentivization could boost the industry. He also discusses the preference for collaborative approaches between public sector units (PSUs) and private industries, citing successful past collaborations. The potential for India to become a significant player in defense technology exports is also highlighted, with a focus on exporting complete platforms rather than components.

15:03

💼 Budget Expectations and the Future of Defense Spending

Hasid Kardiya from Nara Capital shares his expectations for the upcoming budget, suggesting stability in the defense capital budget with no significant increase expected. He anticipates potential reallocations within the armed forces but maintains that the overall budget will remain consistent. Kardiya also discusses the importance of R&D investment, noting the government's increased funding towards startups and technology development. The potential benefits for companies involved in the Navy and Air Force, as well as those in drone technology, are highlighted. The discussion concludes with an analysis of private defense companies that could gain from the budget, emphasizing the secondary benefits to those supplying components and being part of the defense ecosystem.

20:05

🛫 Defense Budget Allocation and Market Valuations

The final paragraph focuses on the expectations from the budget regarding allocations for the Navy and Air Force, and the potential benefits for companies involved in these sectors. It also mentions the possibility of imports for the Indian Navy, particularly related to the Rafale M and drone technologies. Shipbuilding companies are expected to benefit from domestic orders, with policy announcements under the Maritime India Vision 2030. The discussion touches on private sector companies like Par Defense, Zen Technologies, and others that could gain from the budget. The paragraph concludes with a consideration of whether the recent market rally is justified, with an acknowledgment of high valuations but also the potential for further upside based on domestic capital expenditure and future order conversions.

Keywords

💡Defense Stocks

Defense stocks refer to the shares of companies that are involved in the defense industry, producing military equipment, technology, and services. In the video, defense stocks are highlighted as a focus due to the Indian government's ambitious plans to boost defense exports and strengthen domestic manufacturing under the 'Make in India' initiative, which has led to increased investor interest in these stocks.

💡Make in India Initiative

The 'Make in India' initiative is a campaign by the Indian government to encourage companies to manufacture products within India, thereby boosting domestic production and creating jobs. In the context of the video, this initiative is particularly relevant to the defense sector, where there is a push to localize the production of defense equipment and reduce reliance on imports.

💡Defense Spending

Defense spending denotes the allocation of funds by a government to finance its military activities and procurement. In the video, India's ranking as the fourth-highest defense spending country is mentioned, emphasizing the country's commitment to modernizing its Armed Forces and the significant budget allocation for defense in the interim budget.

💡Interim Budget

An interim budget is a provisional allocation of funds by a government, typically presented when a general election is near and a full budget cannot be implemented before the new government takes office. The video discusses the interim budget for FY 2024-25, which provides a preview of India's ongoing defense priorities and policy initiatives.

💡Capital Outlay

Capital outlay refers to the expenditure on acquiring or improving assets that benefit the company or government over multiple years. In the script, the defense minister's capital outlay for defense plans is mentioned, indicating the government's investment in long-term defense infrastructure and equipment.

💡Indigenization

Indigenization is the process of making something native or domestic, often used in the context of producing goods or services within a country rather than relying on imports. The video discusses the indigenization theme in defense, where there is an emphasis on localizing production to benefit domestic manufacturers.

💡Defense Exports

Defense exports involve the sale of military equipment, technology, or services to foreign countries. The video outlines the Indian defense minister's plan to increase defense exports to 50,000 crores by FY 2028-29, showcasing the growth potential of the sector and the country's ambition to become a significant player in the global defense market.

💡Order Book

An order book in a business context refers to the list of confirmed orders for goods or services. In the video, the current order book of the Nifty defense index is mentioned, indicating the future revenue potential and the demand for defense-related products and services.

💡R&D (Research and Development)

R&D refers to the process of creating new knowledge or products through scientific research and development efforts. The video emphasizes the importance of R&D in the defense sector, with the Indian government encouraging and incentivizing private companies to invest in the development of new defense technologies.

💡Geopolitical Scenarios

Geopolitical scenarios refer to the political, economic, and social factors that influence international relations and can affect a country's strategic decisions. The video discusses how the current geopolitical scenarios across the world are driving India's emphasis on self-reliance in critical defense technologies.

💡Technology Hub

A technology hub is a region or center known for its concentration of technology companies and innovation. In the script, the aspiration for India to be recognized as a technology hub in the defense sector is mentioned, highlighting the country's goal to lead in cutting-edge defense technology development.

💡PSUs (Public Sector Undertakings)

PSUs are government-owned corporations or companies in which the government has a majority stake. In the video, the role of PSUs in the defense sector is discussed, emphasizing the need for collaboration between PSUs and private companies to enhance India's defense capabilities.

💡Budget Allocation

Budget allocation refers to the distribution of funds within a government's budget to different sectors or areas of spending. The video talks about the significant growth in defense budget allocation over the years, indicating the government's commitment to the modernization and strengthening of the defense sector.

💡Domestic Ecosystem

A domestic ecosystem in the context of the video refers to the network of local companies, suppliers, and manufacturers that contribute to the defense industry within a country. The script discusses the promotion of a domestic ecosystem for defense manufacturing as part of India's defense policy.

💡Reforms and Policy Initiatives

Reforms and policy initiatives are changes or new policies introduced by a government to improve or update existing systems. The video mentions expecting more reforms and policy initiatives to support the growth of the defense sector, particularly in the area of 'Make in India' and defense exports.

Highlights

Defense stocks have been gaining investor interest due to India's ambitious plans to boost defense exports and strengthen domestic manufacturing under the 'Make in India' initiative.

India ranks fourth globally in defense spending, with a 13% share in the interim budget for FY 2024-25, amounting to 6.21 lakh crores out of a total budget of 47.66 lakh crores.

The interim budget showcases a consistent approach towards modernizing the Armed Forces and promoting a domestic ecosystem for defense manufacturing.

The final budgetary picture for FY 2024-25 is expected on July 23rd, providing more clarity on defense spending.

The current order book of the Nifty defense index stands at 2.87 lakh rupees, indicating future potentials in the sector.

Defense stocks have seen significant gains over the past year, with companies like HAL and BEL showing returns of 99% and 83% respectively.

The government's focus on defense budget allocation has seen a substantial increase, with a 18.3% growth from FY 21 to 22 to the interim budget of FY 24 to 25.

Defense manufacturing in India has grown over 177% to about 1.26 lakh crores in FY 24, supporting the 'Make in India' theme.

Defense exports are targeted to reach 50,000 crores by FY 2028-29, a significant increase from the current level of 21,000 crores.

Expectations of more policy reforms and initiatives to support growth in the 'Make in India' theme for defense manufacturing.

Increased government contracts for acquiring new military equipment such as weapons, aircraft, and warships are anticipated to benefit listed defense companies.

Hindustan Aeronautics has a substantial order book of 94,000 crores, indicating healthy revenue growth visibility.

Analysts project a substantial ordering opportunity of $138 billion in India's defense sector from FY 2024 to FY 2032, driven by increasing demand for advanced defense equipment and technology.

Favorable government policies, particularly those incentivizing R&D and private sector participation, are expected to spur growth in the defense sector.

The defense sector is poised for an all-time high, with a long-term growth outlook supported by geopolitical scenarios and the push for self-reliance in critical defense technologies.

Collaboration between DPSUs and private industries has been successful in past projects, suggesting a continued approach that could benefit both sectors.

The focus for defense companies is to satisfy domestic requirements first before looking at exports, with a preference for exporting complete platforms rather than components.

The budget is expected to allocate funds towards the Indian Navy and Air Force, potentially benefiting companies with products or components in these areas.

Investment in drone and counter-drone systems is anticipated, which could benefit companies operating in these spaces.

Policy announcements under the Maritime India Vision 2030 are expected to benefit shipbuilding and ship repair companies.

Private defense companies supplying components and part of the ecosystem are also expected to gain from the budget allocations.

The recent rally in defense stocks may be justified by high evaluations, but investors should be cautious and consider the post-budget allocation and order pipeline.

Transcripts

[Music]

hello and welcome you're watching budget

trade on NDTV profit and this is Samina

Nala today's focus is defense defense

stocks have been in focus with investor

interest soaring following defense

minister rajat Singh's ambitious plans

to boost India's defense exports and

strengthen domestic manufacturing under

the make in India initiative India

stands fourth in the rankings of highest

defense spending countries next only to

the US China and Russia the defense

share and budget allocation in the

interim budget for F5 2425 stood at 13%

at 6.21 lakh crores out of a total

budget of 47.66 lakh crores while the

interim budget provides a preview of

India's ongoing defense priorities and

showcases a consistent approach in

implementing policy initiatives towards

modernization of the Armed Forces and

promoting a domestic ecosystem for

defense manufacturing the final

budgetary picture will be provided by

the full budget of F5 2425 which is

expected on the 23rd of July well

remember the current order book of the

Nifty defense index stands at 2.87 lakh

rupees for the future potentials well

let's quickly listen into what the

defense minister had to say as he outlay

or laid out rather the capital outlay

and his very ambitious defense plans

PR

welli is standing by to tell us what the

sector expects from the big bag budget

in the next couple of weeks anushi the

stocks have gotten very excited so from

garden reach to a coachin to masg dogs

to Zen a Paris defense these stocks have

had a phenomenal dream run over the last

one year 6 months and even the last one

month walk us through what's expected

from the sector in terms of budget

expectations and also how how has the

stock performed in terms of investor

wealth

creation well Samina defense is the

theme of today and just let's just look

at how the defense in general has done

if you look at the defense stocks their

year-to dat return their one month

return they've been on a tear ever since

just look at a Hal just look at BML 99%

83% of gains in this just year-to dat

period while in one month also the

there's no stopping these defense talks

about 49% gains for coachin Shipyard all

the ship building companies in fact

let's go to a mazow dog as well um mazow

dog Garden reach we are seeing about

198% to 144% of gains over the year

to-day basis and even the 97% Garden

reach has this clocked in but before we

go into what we should be expecting

about these defense budget expectations

let's see overall how the government has

focused on the budget over the years so

if you look at the allocation over the

period so we have seeing a significant

jump in the growth period so now fy21 to

22 4.78 lakh CR if we go to FY 24 to 25

in this internal budget we saw about

6.21 lakh CR 18.3% of growth so strong

growth both numbers here in fact even if

you look at the 6.21 lakh CR that we are

looking at this was the highest am

allocation given by the budget to any

other Ministry so defense continues to

remain strong over here and even if you

look at their expenditure to the the

Union to the overall budget so again it

has more or less remained in a 13 to 15%

of range so in this interim budget we

saw that the total spending was about

30% again going to what we can expect

going forward from this line onwards

some of the key themes that remains in

Focus one is the indigenization theme

now the defense localizing the

production will continue to benefit some

of these domestic manufacturers even

some of one of the latest comments also

came by our defense minister rajat Singh

where in our defense manufacturing has

gone up over 177% to about 1.26 lakh CR

in fy4 this continues to support the

make in India theme it said that the

make in India continues to reach to New

mil stes and similar lines we can expect

some more reforms or more initiatives to

support this growth in the make it India

theme going forward as well other than

that even if you look at the defense

exports now defense exports we are

seeing that the sectoral exports have

jumped to about 50,000 CR that's what

the rajat sing's plan is to take the

exports number to 50,000 CR by FY 28 to

29 so if you look at the current exports

that is about 21,000 CR a 3X jump from

fy21 level just let's just pull up a

chart to understand how the exports have

done yeah so if you look at the exports

51% growth 24% growth 32% growth so

there's no stopping these exports so

similar lines we can export more reforms

more policy initiatives for supporting

the kind of um outline that the

government the defense minister has

given for these and how this would

continue to benefit the defense players

now the last now the last one that we

need to focus on is the higher

government contracts for acquiring these

new weapons aircraft warship and other

military equipment as well so with these

again if there are more government

contracts with this the top listed B

players are to benefit we can just look

at the order book and get a sense now H

has 94,000 CR of an order book while if

you look at something like a garden

reach ship Builders 22,000 CR of an

order book wherein their book to Bild

ratio is about six over six times so

this shows about healthy Revenue growth

visibility also going forward so again

now the focus remains on how these

contracts increase over the period and

how the companies can um benefit from

these increasing orders so back to you

Samina the defense continues to remain

on a strong footing it has generated

significant wealth and Us in fact as we

speak as well defense stocks continue to

be on the buy list of a number of large

proces as well in fact namura recently

emphasized on India's defense sector

projecting a substantial ordering

opportunity of $138 billion spanning for

f524 to f532 the forecast is underpin by

increasing demand for advanced defense

Equipment Technology Services signaling

strong growth potential for the sector a

well to begin with we've got Amit

Mahajan director of Faris defense who

joins us to tell us what his wish list

is as we go into the budget Amit morning

thanks aan for joining us Amit we live

in exciting times um I mean if you're an

investor buying these defense stocks

obviously you're laughing your way to

the bank you are at the center of all

the activity and excitement uh the

defense sector has witnessed uh you want

to start by telling us what's on your

wish list a lot has changed in the last

few years for sure but as we look ahead

into the next 5 to 10 years what do you

expect from this

budget Samina firstly thank you for

having me over it's always a pleasure

talking to you uh the defense sector is

is slated for an alltime high not just

what you see right now but even looking

at the future as to what to expect from

this sector I think uh the days have

just started this is just the dawn uh

there is a huge huge big big long long

day with a good Sunshine awaiting us um

why I don't know whether uh you could

you could analyze from the last four

five years of analysis uh that your team

did

uh why this has increased in in favor of

the defense sector you have to

understand the geopolitical scenarios

across the world today India although

has almost all the countries in the

world as their allies it is imperative

for us to be a

self-reliant country when it comes to

Critical Defense Technologies now this

is something which I think is an

emphasis as an underline uh message that

uh the country

and the government is trying to give to

uh the industry that now it is the time

that we step up we we start investing

into this and so will the business be

offered so you see the budget

allocations you see the growth in the

last three years looking at the

geopolitical scenario this is this is

the roadblock this is a fundamental uh

Stone which is being laid for a much

much bigger outlay in defense this is

this is a very very encouraging sign uh

it is going to make us not just

self-reliant but it is also going to

create us as a technology Hub when it

comes to cutting a technology because

defense and space always drives the

technology segment this is where we will

start leading and be recognized

worldwide as a technology sector a

technology Hub in the whole uh spectrum

of things right it's always good talking

to you Amit great to get perspective but

let's get specific now I and you've said

this to me as well time and again that

it's the favorable government policies

that will spurt or feed growth for your

sector and for your company what are

these policies that we're talking about

where do you think the trust should lie

should it be an R&D should it be on

encouraging uh you know private

companies to compete with psus should it

be encouraging and making India far more

competitive in the global Marketplace so

take one at a time and tell me what your

expectations are in terms of policies if

it's R&D where do things stand and what

should be done I think a small step

towards the R&D uh I if I may call it as

U privatization of development in

defense Technologies this step when they

put a mandate of 25% of the R&D done by

drdo has to be done by the industry I

think it was this was a small step in

the direction of what they want to

achieve at the end of it all today if

you look at Dr a lot of R&D happens

there amazing brains of our country when

it comes to defense engineering and

Technologies they work in the dro now

when we are taking a 25% pie of such a

big development activity this is a big

big big uh opportunity for the industry

because industry you you have to

understand that the industry is focused

on delivering and then generating

revenues and you know clocking all the

finances making sure that the working

capital is in place and you know doing

all the all the things that are required

for the business now when this industry

is expected to develop Technologies all

by themselves under the guidance of drdo

this is a shift of mindset for a

businessman now this when when a

businessman start looking at development

and start doing

development uh you just see the effect

not now but maybe a couple of years from

now that when an industry is get AED up

to do developments at the rate of much

faster than drdo but at the technology

Readiness as what drdo is the future is

going to be very very bright this this

will make sure that uh we are

decentralizing the development in

defense Technologies this I I would

expect um uh an incentivization of this

particular activity I would I had

mentioned this earlier also that

development linked incentive is

something that will be great for an

industry like defense and this is

something which I would wish for when it

comes to uh development and R&D when it

comes to looking at maybe the PSU

competing with the you know the dpsu

competing with the Private

Industry uh we are trading at the tier

two or tier 1.5 level uh but when it

comes to maybe see the processes the

domain expertise lie in the hands of the

BPS ISU it is not very easy to replicate

that I think a collaborative approach I

would always wish for that a dpsu works

with a large uh conglomerate in a

collaborative operator there have been

instances where they have worked

together uh they have there have been

the rohini radar I can think of Akash

missile I think there are multiple

programs which have been extremely

successful where the dpsus have

collaborated with the large uh private

industries of the country and the the

the result has only been success so I

think more collaborative approach than a

competitive approach should be the way

to go and that's such a fair point right

and if you collaborate only then can you

get you know better and compete as well

in the global place and of course R&D

encouraging development seems like the

need of the a you're right you said this

to me when we spoke early this year as

well ahead of the interim budget uh but

we didn't see much getting done on that

front uh as we look ahead how do you

think uh a company like yourself or

peers right uh can compete more

efficiently in the export space in the

global Marketplace uh borders have to be

a lot more secure today I know our

exports to countries in Africa has gone

up because of the war in Ukraine uh what

do you think the government needs to do

to encourage that and make companies

like yourself a lot more competitive if

you aren't I know you already are but

what more needs to be done and what more

could be done rather

if you ask me a company like me uh doing

exports is actually not very difficult

but uh it is it is for me to choose that

catering to the domestic need where the

requirement is far more higher than my

export Market uh this is far more uh

profitable as well than an export market

and um I enjoy a preferential treatment

here in in serving the domestic industry

my plan a always will be to First make

sure that I'm satisfying the domestic

requirement in defense when it comes to

um all the platform when it comes to

Army Navy as well as on Air Force I will

look at exports even if you ask me today

we are export ready but I will look at

exports not for components I would not

look at uh India to be an export Hub of

components what we are today uh

embarking upon by development being

offloaded to Industries is we are

preparing ourselves to be a much

significant player when it comes to

defense technology when we start

delivering platforms I would always want

to dream that India exports a submarine

to another country rather than you know

exporting a small part of a submarine to

another country so this is where we

should be looking at when that happens

like you you just want to take an

example of a country like USA they

deliver platforms and you just imagine

the pull that uh a delivery of a

platform by a country like USA to an XYZ

country the whole industry the the pool

gets created it benefits from the large

segment to the smallest smmes working

for that particular industry it

generates a great amount of pull we have

started doing this in certain areas I

think in radar programs we've already

started and I think brahmos missile is

one classic example as to how we are

exporting a larger platforms I think a

similar uh thrust on various other

segments this will create a great great

opportunity for the domestic industry oh

it's exciting times we live in uncertain

but nevertheless very exciting times

good luck and hopefully some of those

fact uh you know points you mention

comes true in this budget we'll

hopefully catch you around budget time

again and good luck with earnings as

well we have hasid kardia who joins in

Nara Capital to talk to us about what

his expectations are from budget 2020

2425 hi asid thank you for joining us

has sorry we were in a conversation with

Paris defense uh but just uh coming to

you now it's all eyes on the budget and

one sector that's created enormous

wealth has been the defense sector in

your opinion in your expectation what is

going to be the defense outlay this

budget do you expect an increase uh from

what we saw between the in and now

hasit I think you're on

mute are you able to hear me now now I

can yeah okay so basically I expect the

uh defense capital budget to be stable

at 1.72 lakh I don't expect any increase

as far as the budget is concern but

there could be a allocation made on a

difference between what we pay for

Indian Navy between the Army and the Air

Force so there could be some jugy within

uh the within the Armed Forces but the

overall budget what I expected to be uh

stable uh so you are saying that most of

these defense funds would be going into

Indian Navy Army and Air Force is that a

fair

expectation yes absolutely has also uh

you know we were talking of Paris

defense just before we got into this

conversation with you

and he was telling us about how it is

important for those vertical or those

companies to see the government

encouraging and incentivizing R&D how

important do you think is this as an

expectation and do you think it's a fair

expectation that could potentially be

fulfilled in this

budget yes I think it's a very fair

expectation and we have been not

investing much in the R&D side it was

only largely drdo who was uh you know

putting more of efforts on the R&D and

now over last few years uh the ministry

of Defense has started lot more uh

activities uh to fund some of the

startups uh so there's a technology

Development Fund uh they have also

invested in that and there is no fund

allocation being given uh to these kind

of uh Investments within make one make

two projects where the government is

funding helping private sector to work

with them and develop products so uh

there is this initiative which is uh

taken uh to ramp up the R&D and if you

look at the overall budget allocation

towards R&D and that is also come to an

alltime high in the interim budget it

came to around 25,000 cres this number

let's say five years back or close to

around 18,000 so there has been a rise

as far as the R&D budget is concerned

how should ship Builders or companies

like Garden reach coach and shipyard

Mount dogs of course not too many

private players in the ship building

space drones uh the likes of a power's

defense as Zen technology aircrafts AGL

uh case in point and cyber I believe

that's the other uh emerging uh you know

space that we've been talking about

these stocks or listed companies in the

space have had an exceptional dream run

over the last few months and the last

month especially has been phenomenal at

this juncture if you're not expecting an

increase in capital outlay what

companies do you think could benefit

most through this budget

announcement so most company so so

budget is likely going to be more

shifted towards uh the Navy as well as

the Air Force so any companies who have

products or components in this

particular space is likely to see more

benefit and there's also some investment

which will be going towards drone as

well as counter drone system so any

companies within the space would benefit

so just to give names on the Air Force

side it will largely be Hindustan

aeronautics who will get the benefit as

far as navy is concerned uh we are

expecting some imports to also happen

for the Indian Navy side uh which will

largely be related to the Rafal M and

also to the uh drone side of it uh so

ship building companies on the radar

which can benefit from the domestic

orders could be mesg dog followed by kin

Shipyard there's also a policy

announcement which we can expect on the

ship building and Ship Repair side uh

under the maritime India Vision 2030

document so that should help companies

on coaching Shipyard as well as gardened

ship Builders to benefit on the

commercial ship building side so that is

what we expect to uh see from the budget

as well as uh post budget you know hasit

as expected all the companies mentioned

by you are dpsu right anything in the

private uh amongst the private players

in the defense space that you're

constructive on because you do have you

have Optics when it comes to Paris

defense you have Zen technology that's

got drones can those also stand to gain

you think anything in the private sector

place yes if if you look at the primary

beneficiaries are always the psus but

the secondary level of benefit which

supplies these component and which are

part of the ecosystem are the private

defense companies and the companies

which uh I think would benefit one is

par defense other is Zen Technologies

data pattern um and estra microwave are

some of the names which which we like

within the private defense pie and also

on the platform side it will be bat

Forge it's very LLY harit do you feel

like the recent rally is Justified uh

because it is a budget rally right uh

and these prices are well valued as we

see it or do you feel like uh some of

these counters have ran up ran ahead of

themselves and it's buying them

pre-budget may not be

advisable uh so so uh one thing to say

is uh definitely evaluations are high

but they are still under a reach if you

look at the domestic Cap Code companies

their multiples are significantly higher

than what uh the defense uh pack is

trading in so there is an upside uh

which could be seen from here on as well

uh however this budget really is largely

uh you can play with but post that how

the allocation happens within the

defense budget and what is the pipeline

which would be converted into order INF

something which To Be watchful and you

have to take a decision on that right

thank you very much har would have loved

to have a more extended chat with you

but hopefully closer to the budget we'll

try and connect back with that we're

completely out of time on this edition

of budget trades thanks for watching

stay tuned to NTV profit

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