Which stocks to buy when Government asked the suppliers to increase their production and prepare for a war like scenario?
The first question is who is the main supplier?
Ordnance Factories Board
The 41 Indian Ordnance Factories under control of Ordnance Factories Board manufacture most of the Army equipment like small arms, ammunition, combat vehicles, artillery, tanks etc. They are not in stock market.
Read more at Ordnance Factories Board
But there are major private players in control or you can say defence related stocks and here is how to invest in them –
Ashok Leyland – My favourite; I have already bought tons of share of it. The company is the largest supplier of logistics vehicles to the Indian Army—70,000 vehicles on Stallion platform are the army’s veritable logistics backbone.
Astra Microwave – Stands second in my list. Bought it too. Very fundamental company. It mainly manufactures high value-added radio frequency (RF) and microwave based super components.
Mahindra & Mahindra (M&M) – My third best bet. Bought shares too. Another major buy. It provides total solutions for the entire range of light combat and armoured vehicles and their derivatives for defence and security forces.
Bharat Forge – I am not buying it but keeping a tab on their artillery gun development news. If there is good news, I will be buying it because Government will not buy these artillery guns as there were some flaws found in their testing phase.
Bharat Electronics – Radars, Military communications
Larsen & Toubro (L&T) – Major Buy; I am looking for dips. L&T has industrial licenses for cover design, development, construction/manufacturing and assembly of warships, submarines, high-speed boats, radars, arms and armament, etc.
Solar Industries – Explosive makers. Good exporter but slow. Skipping it because it’s most revenue comes from exporting so I do not personally think India’s demand will surpass that and a major war or something threaten its export business. So maybe it gets dip down.
Reliance Industries – Thinking on it. It has not only Indian Government contracts as well as it has bolted a deal with France Government.
Rolta India – My own company has some of their IT contracts. It provides geospatial solutions but not much profitable.
BEML – Supplies defence ground support equipment. Company has been maintaining a healthy dividend pay-out of 38.98% but has delivered a poor growth of 2.38% over past five years as well as has a low return on equity. Buy it for long term but No from me for short term.
Walchandnagar Industries – Suppliers. Not worth mention
Pipavav Defence and Offshore Engineering – Builds ships. Not buying it.