India’s state-run defence shipbuilders—Mazagon Dock Shipbuilders, Garden Reach Shipbuilders & Engineers (GRSE), and Cochin Shipyard—are on the brink of a remarkable order surge that could potentially triple their combined order books over the upcoming years. Recent insights from Antique Stock Broking suggest that a significant recovery in defence stock prices, triggered by geopolitical tensions and substantial defence contract approvals, has rekindled investor interest after a period of price correction. Since April, the Defence Acquisition Council has greenlit defence contracts totalling ₹54,000 crore, resulting in renewed optimism for these companies.
Antique Stock Broking has reiterated its ‘buy’ ratings on both Mazagon Dock and GRSE, while maintaining a cautious stance on Cochin Shipyard, primarily due to uncertainties concerning the timeline and scale of the proposed second indigenous aircraft carrier (IAC-II). This sentiment is reinforced by the expectation that shares may trade at up to 45 times FY27 core earnings, buoyed by a strong policy framework and increasing indigenisation efforts. Notably, the defence sector is witnessing a drastic escalation in spending, with ₹8.45 lakh crore worth of orders approved between FY22 and FY25—3.3 times the amount from the previous three years.
The pipeline of projects is particularly promising, featuring high-stakes naval contracts such as three additional Kalvari-class submarines for Mazagon Dock, the P75I submarine programme, next-generation corvettes, and the advanced P-17B frigates. The anticipated Kalvari-class submarine order alone could amount to ₹36,000 crore, with a likelihood of placement by FY26. Moreover, the P75I order, estimated at ₹70,000 crore, may be awarded to Mazagon Dock in collaboration with Thyssen Krupp Marine Systems, emphasising the strategic partnerships formed to enhance efficiency and expertise.
Despite this robust order backlog, Antique flagged Cochin Shipyard’s vulnerability, attributing it to the lack of consensus regarding the design and necessity of IAC-II. The shipyard’s near-term order visibility is hence dependent on governmental prioritisation between submarines and aircraft carriers. Nonetheless, the impetus from the present framework indicates sustained growth. Antique’s projections include strong visibility on ₹2.12 lakh crore in orders expected for FY26-27, reinforcing their optimistic outlook for India’s defence shipbuilding sector.
In 2024, the market capitalisation of these shipbuilders has surged significantly, adding over ₹1.5 lakh crore collectively. This rise is supported by an impressive growth in defence production value, which reached ₹1.26 lakh crore, marking a 16.8% increase year-on-year. Mazagon Dock’s shares have soared by 151%, while Cochin Shipyard saw an astonishing rise of nearly 320%, and GRSE’s shares have tripled, showcasing investor enthusiasm and belief in the sector’s potential.
Recent analyses also highlight Mazagon Dock’s improved financial performance, boasting an EBITDA margin of 18.5%—a notable increase from the previous year’s 9.6%. In contrast, Garden Reach’s margins have faced pressure due to rising raw material costs, illustrating the varying impacts of market conditions across different companies.
As the anticipation for further orders heightens, including a potential third aircraft carrier to replace INS Vikramaditya by 2038, investor confidence appears well-founded. The next wave of large-scale projects is likely to be led by the Project-18 destroyers, valued at ₹80,000 crore, alongside the indigenous Project-76 submarine programme, which could range from ₹1.2 lakh crore to ₹1.5 lakh crore. Thus, while uncertainties loom, the trajectory for India’s defence shipbuilding sector is set toward expansive growth, driven by governmental support, policy advancements, and international collaborations.
As a whole, this sector encapsulates a unique confluence of national security and economic growth, heralding a new chapter for India’s ambitions as a maritime power.
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Source: Noah Wire Services
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