This year, India allocated ₹6.21 lakh crore to the Ministry of Defence, which constitutes 13 percent of the total Budget expenditure. This increase in capital allocation reflects the government’s commitment to enhancing the operational capabilities and modernization of the Indian Armed Forces.
The Indian Navy, the naval wing of the Indian Armed Forces, is primarily tasked with safeguarding the country’s maritime borders. Emphasizing maritime domain awareness, India announced in 2021 its plans to establish forty-two new coastal radar stations under the Ministry of Defence to bolster coastal surveillance.
Furthermore, the Indian Navy is integrating advanced equipment and technology, such as BrahMos supersonic cruise missiles and U.S.-made armed MQ-9B SeaGuardian drones, to augment its capabilities.
Additionally, the Navy is actively developing indigenous systems, including medium-range surface-to-air missiles, torpedo tube launchers, and a 76mm super rapid gun mount.
Here are three small-cap stocks that cater to and provide services to the Indian Navy.
Krishna Defence & Allied Industries Ltd
Krishna Defence & Allied Industries Limited is one of India’s few vertically integrated defence solutions providers, with research and development capabilities including product design, engineering, simulation, prototyping, and testing.
Krishna Defence & Allied Industries Ltd has established multiple licensing agreements with the Defence Research and Development Organisation (DRDO) to manufacture and supply specialized defence application products for the Indian Armed Forces.
Under those agreements, Krishna Defence & Allied Industries Ltd offers a diverse range of high-performance products tailored for naval applications and other utilities.
These include shipbuilding steel bulb bars, special steel alloy bricks used for ballast weight in critical applications, super alloy weld consumables such as welding wire, flux, and electrodes, as well as food containers and improved space heating devices. In February 2024, Krishna Defence & Allied Industries Ltd secured an order worth ₹8.80 crore from the Ministry of Defence for a special steel product designed for naval applications, valued at ₹193.42 crore.
The company’s revenue surged by 68% year-on-year, increasing from ₹63 crore in FY22-23 to ₹106 crore in FY23-24. Concurrently, net profit doubled from ₹5 crore to ₹10 crore during the same period.
On Friday, Krishna Defence & Allied Industries Ltd shares closed at ₹823 per share, reflecting a 2.48% decline on the National Stock Exchange. The company boasts a market capitalization of ₹1,129 crores.
Avantel Limited
Avantel Ltd is a key supplier of communication products and services to the Indian Navy and other branches of the Indian defence forces.
Avantel Limited specializes in the design, development, and maintenance of wireless and satellite communication products, defense electronics, radar systems, and network management software applications, primarily catering to aerospace and defense sectors.
In April 2024, Avantel secured a supply order valued at Rs. 1.84 Crores from Headquarters Naval Aviation, Goa. Earlier, in January 2024, the company also received a significant contract worth Rs. 5.3 crore from the Naval Headquarters, Ministry of Defence, for the development and manufacturing of LDPC Satcom Baseband equipment for the Cband Hub.
The company boasts a prestigious clientele including the Indian Army, Indian Railways, Indian Air Force, Indian Navy, ISRO, DRDO, L&T, Boeing, Goa Shipyard Ltd, CSL, among others.
Avantel Limited saw a remarkable 45% year-on-year increase in revenue, rising from Rs.154 crore in FY22-23 to Rs. 224 crore in FY23-24. Concurrently, its net profit surged by 83% from Rs. 30 crore to Rs. 55 crore during the same period.
On Friday, Avantel Limited shares closed at ₹210 per share, marking a 1.90% increase on the Bombay Stock Exchange. The company holds a market capitalization of ₹5,098 crores.
Marine Electricals (India) Ltd
Marine Electricals (India) Limited is an integrated electrical and automation solution provider offering comprehensive solutions across industries with a significant presence in the marine sector, including the Indian Navy and commercial shipbuilding.
The company specializes in manufacturing and selling a wide range of marine and industrial electrical & electronic components, such as switch-gears and control gears. Additionally, it is actively involved in the renewable energy sector, particularly solar power.
In December 2023, Marine Electricals secured a ₹31.85 crore contract from the Ministry of Defence to supply 6 integrated bridge systems (IBS) designed for TEG and Shivalik Classes of ships.
Over the past year, Marine Electricals has shown significant financial growth, with revenue increasing by 40% year-on-year, from ₹443 crore in FY22-23 to ₹622 crore in FY23-24. Concurrently, net profit rose by 53%, climbing from ₹17 crore to ₹26 crore during the same period.
Marine Electricals boasts a diverse client base, including entities like the Indian Coast Guard, Cochin Shipyard Limited, MRF, BHEL, and Abu Dhabi Shipping Building. In the industrial segment, notable clients include TATA Communication, IBM, Cipla, and Lodha, among others.
On Friday, Marine Electricals shares closed at ₹240 per share on the national stock exchange, marking a 5% gain. The company currently holds a market capitalization of ₹3,180 crores.
Written by Omkar Chitnis
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