In a significant move towards improving the capabilities of the Indian Defence Industry, the Defence Acquisition Council (DAC) has approved Acceptance of Necessity (AoNs) for capital acquisition proposals totaling to a humongous Rs. 2.23 lakh crore on November 30, 2023.
The decision aligns with the government’s strong commitment to achieving “Aatmanirbharta” (self-reliance) in defence-related products. Notably, a significant 98% of this amount, translating to Rs. 2.20 lakh crore, will be directed towards sourcing from domestic industries, demonstrating a push towards the “Make in India” initiative within the defence sector.
Where is the money going to be spent?
For Indian Army Personnel
Advanced Anti-tank Munitions: AoNs were granted for two types of Anti-tank Munitions, recognizing the critical need for advanced weaponry to neutralise enemy tanks, armoured personnel carriers, and personnel.
State-of-the-art Towed Gun System: The procurement of a cutting-edge Towed Gun System (TGS) is slated to replace the ageing Indian Field Gun (IFG), becoming a mainstay for the Indian Army’s Artillery forces.
Enhanced Lethality and Safety: A pivotal move to enhance both lethality and safety, AoN was accorded for the 155 mm Nubless projectile for use in 155 mm Artillery guns.
For Indian Navy’s Offensive Power
Medium Range Anti-Ship Missiles: The DAC’s approval for the procurement of Medium Range Anti-Ship Missiles (MRAShM) for surface platforms provided a significant boost to the Indian Navy’s offensive capabilities. This lightweight Surface-to-Surface Missile is anticipated to serve as a primary offensive weapon on Indian Naval Ships.
For Indian Air Force
Light Combat Helicopter: The DAC’s decision to grant AoNs for the procurement of Light Combat Helicopter (LCH) from Hindustan Aeronautics Limited (HAL) for the Indian Air Force (IAF) and Indian Army will enhance the nation’s aerial capabilities while also boosting the indigenous aerospace industry.
Light Combat Aircraft: Similarly, the approval for the procurement of Light Combat Aircraft (LCA) Mk 1A from HAL further strengthens the armed forces and contributes significantly to the domestic aerospace industry.
Strategic Amendments to DAP 2020
The DAC also amended the Defence Acquisition Procedure (DAP) 2020 so moving forward, a minimum of 50% indigenous content, in the form of material, components, and software manufactured in India, shall be mandatory in all procurement cases.
Which Listed Companies Will Benefit From This Move?
Stocks which may be affected by this announcement:
- PTC INDUSTRIES LTD
- DCX SYSTEMS LTD
- BHARAT DYNAMICS LTD
- MAZGAON DOCK
- GARDEN REACH SHIPBUILDERS
- HINDUSTAN AERONAUTICS
- DATA PATTERNS
- BHARAT ELECTRONICS
- COCHIN SHIPYARD
- HFCL Ltd
- HBL POWER SYSTEMS LTD
- PREMIER EXPLOSIVES LTD
The DAC’s recent decisions represent a significant step forward in India’s quest for self-reliance in defence and mark a major boost for the domestic defence industry. This will help the above listed players to get new orders over the period and help their order books and revenues grow.
(Note: The above mentioned securities are exclusively for educational and informational purposes only and should not be treated as a recommendation)