The Indian defence industry plays a crucial role in the nation’s economy and stock market. Increased defence spending by the government is likely to boost demand for defence products and services, benefiting defence companies.
Additionally, initiatives like “Make in India” and “Atmanirbhar Bharat” are driving efforts to enhance local manufacturing and reduce dependence on foreign imports.
Listed below are two microcap defence stocks under Rs. 500 to add to your watchlist:
With a market capitalization of Rs. 669 crores, the shares of Atmastco started Friday’s trading session on a higher note at Rs. 278.85 compared to its previous close of Rs. 270.65. Within a few minutes of the opening bell, the shares locked a 5 percent upper circuit at Rs. 284.15 apiece.
Looking at the company’s financial performance, the revenue decreased by around 7 percent from Rs. 242 crores during FY22-23 to Rs. 224 crores in FY23-24. Contrastingly, the net profits jumped by 23 percent from Rs. 13 crores to Rs. 16 crores during the same timeframe.
Atmastco has diversified its operations into several sectors, including a significant focus on defence through its subsidiary, Atmastco Defence Systems Private Limited.
This subsidiary specializes in the manufacturing of protective gear, specifically bulletproof jackets and helmets for armed forces, as well as full-body protectors designed for female troops.
The company has also entered into licensing agreements with the Defence Research and Development Organization (DRDO) and other defence establishments to enhance its manufacturing capabilities for military applications.
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As per reports, the company views its defence business as a contribution to the Atmanirbhar Bharat initiative in the defence sector, as it is only the third company in the country to receive a license for manufacturing bulletproof helmets.
In terms of key financial metrics, the company reported a Return on Equity (RoE) of 15.13 percent and a return on capital employed (RoCE) of 20.86 percent for the period spanning FY23-24. Further, the net profit margin during FY23-24 was 7.29 percent.
Recently, the company has also received a letter of intent for fabrication and supply from Bharat Heavy Electricals Limited (BHEL) of Rs. 36 crores for the supply of PG 35 Columns for the NTPC LARA Project through the OVM model.
Atmastco Limited is a diversified engineering, procurement, and construction (EPC) company based in Bhilai, Chhattisgarh, specializing in turnkey projects, steel fabrication, and defence manufacturing.
Lokesh Machines Ltd
With a market capitalization of Rs. 784 crores, the shares of Lokesh Machines started Friday’s trading session on a higher note at Rs. 425 compared to its previous close of Rs. 387.45. Within a few minutes of the opening bell, the shares clocked a 10 percent upper circuit at Rs. 426.15 apiece.
Coming onto the company’s financial performance, the revenue decreased by 22 percent from Rs. 80.34 crores during the March quarter to Rs. 62.53 crores during the June quarter. On the other hand, the net profits declined by 78 percent from Rs. 4.69 crores to Rs. 1.03 crores during the same period.
As of 31 March 2024, the company had an order book of Rs. 216.36 crores, out of which 93.36 crores of orders were received from the Machine Tools Division and the majority of orders i.e., Rs. 123 crores were received from Auto Components and Defence Division.
In terms of key financial metrics, the company reported a Return on Equity (RoE) of 7.06 percent and a return on capital employed (RoCE) of 12.42 percent for the period spanning FY23-24. Further, the net profit margin during FY23-24 was 4.71 percent.
In the defence sector, the company has initially ventured into small arms with a portfolio, including the 9×19 Sub Machine Gun and the 7.62×51 Light Machine Gun.
In a significant milestone, Lokesh Machines has secured a substantial order worth Rs. 4.26 crore from the Northern Command of the Indian Army for 550 ASMI submachine guns.
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This marks the first instance of a domestic private manufacturer successfully securing an order from the Indian Army for a 100 percent indigenously designed and manufactured small-arm
The company has 6 manufacturing units 5 in Hyderabad and 1 in Pune, with an annual capacity of 900 General-Purpose Machines, and 10 Special Purpose Machines.
In FY23, the company set up a new division for manufacturing of Defence and Aerospace components. It owns more than 200 catering to automotive and non-automotive sectors. In collaboration with the Defence Research and Development Organisation (DRDO), Lokesh Machines has successfully manufactured India’s first indigenous 9mm machine pistol.
Furthermore, the company has secured a commercial license for small arms manufacturing from the Ministry of Home Affairs and delivered over 100 weapon sets to government agencies.
The company further aims to boost revenue within the Defence Division by harnessing its expanded capacities, introducing new product lines, and capitalising on emerging opportunities in the sector.
Additionally, the company aims to broaden its international presence by seeking new markets and opportunities in the automotive and defence sectors.
Headquartered in Hyderabad, Lokesh Machines was incorporated in 1983. The company is a leading manufacturer of special purpose machines (SPMs) and machine tools, primarily serving the automobile, power generation, and general engineering industries and has forayed into the defence sector.
Written By Vaibhav Patil
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