PSU Defence Stock Surges 5% After CCI Nod for ₹7,000 Cr Contracts
Introduction
PSU Defence Stock: Shares of Bharat Forge Ltd, a leading defence and engineering company, soared 5% after securing approval from the Competition Commission of India (CCI) for a massive ₹7,000 crore defence contract. This crucial approval has boosted investor confidence, reinforcing Bharat Forge’s pivotal role in India’s self-reliant defence strategy.
Stock Price Movement
During Wednesday’s trading session, Bharat Forge shares surged to an intra-day high of ₹1,202.00, marking a 6% increase from the previous close of ₹1,136.00. The stock later settled at ₹1,191.50 per share. Over the past five years, Bharat Forge has delivered over 180% returns to its investors, reflecting its strong growth trajectory.
Why Did the Stock Jump?
The sharp rally in Bharat Forge’s stock came after the government, led by the Prime Minister’s Cabinet Committee on Security (CCS), approved the acquisition of 307 advanced towed artillery gun systems (ATAGS) for the Indian Army. These guns, designed by the Defence Research and Development Organisation (DRDO), boast an impressive strike range of 45-48 km.
Additionally, the contract includes 327 gun-towing vehicles for 15 artillery regiments. Bharat Forge, which emerged as the lowest bidder, will manufacture 60% of these artillery guns in partnership with Tata Advanced Systems. This deal is part of the government’s larger vision to induct 1,580 advanced guns into the Army, further strengthening India’s defence capabilities.
Bharat Forge’s Export Performance
Bharat Forge has positioned itself as a global leader in defence and engineering, with strong export revenues:
| Region | Revenue (Q3 FY25) |
|---|---|
| Americas | ₹854.0 Cr |
| Europe | ₹233.3 Cr |
| Asia | ₹63.7 Cr |
With total exports amounting to ₹1,151.0 crore in Q3 FY25, Bharat Forge continues to expand its presence in international markets. The company operates manufacturing units in India, Germany, and Sweden, with India housing the world’s largest single-location forging facility.
Financial Performance and Earnings Report
Despite securing a high-value defence deal, Bharat Forge reported a drop in revenue and net profit in Q3 FY25 compared to the previous year:
- Revenue: ₹3,476 crore (-10% YoY)
- Net Profit: ₹213 crore (-16.1% YoY)
This decline can be attributed to weaker demand in certain global markets and increased raw material costs. However, the new defence contracts are expected to provide a long-term revenue boost.
Key Financial Ratios
| Metric | Value |
|---|---|
| Market Cap | ₹57,163 Cr |
| Current Price | ₹1,193 |
| 52-Week High / Low | ₹1,826 / ₹1,002 |
| Stock P/E | 60.1 |
| Book Value | ₹152 |
| Dividend Yield | 0.75% |
| ROCE (Return on Capital Employed) | 12.9% |
| ROE (Return on Equity) | 12.7% |
| Face Value | ₹2.00 |
| Promoter Holding | 44.1% |
| Price to Book Value | 7.84 |
| Debt to Equity Ratio | 1.06 |
| Pledged Percentage | 0.00% |
| Industry P/E | 28.3 |
| Graham Number | ₹256 |
| Intrinsic Value | ₹315 |
| RSI (Relative Strength Index) | 65.5 |
| EPS (Earnings Per Share) | ₹19.1 |
| No. of Equity Shares | 47.8 Cr |
| PEG Ratio | -21.1 |
| 200 DMA (Days Moving Avg.) | ₹1,286 |
| Free Cash Flow (3 Yrs) | ₹29.9 Cr |
| Free Cash Flow (5 Yrs) | ₹724 Cr |
| Total Debt | ₹7,740 Cr |
| Return on Assets | 4.71% |
| Price to Sales Ratio | 3.70 |
Brokerage View – Should You Invest?
JP Morgan has given a “Buy” recommendation on Bharat Forge with a target price of ₹1,270 per share, indicating a 20% upside from the current levels. The stock remains a strong long-term bet due to its dominant position in defence manufacturing and export opportunities.
About Bharat Forge
Founded on June 19, 1961, by Nilkanthrao A. Kalyani, Bharat Forge is the flagship company of the Kalyani Group. The company specializes in manufacturing critical components like front axle beams, steering knuckles, connecting rods, crankshafts, and aluminum castings. With its presence in both defence and auto sectors, Bharat Forge is a key player in India’s manufacturing ecosystem.
FAQs – Bharat Forge’s Stock Rally Explained
1. Why did Bharat Forge’s stock jump by 5%?
The stock surged after receiving CCI approval for a ₹7,000 crore defence contract, which includes manufacturing 307 ATAGS howitzers and 327 towing vehicles for the Indian Army.
2. How much of the contract will Bharat Forge handle?
Bharat Forge, in partnership with Tata Advanced Systems, will manufacture 60% of the artillery guns, as it emerged as the lowest bidder.
3. How has Bharat Forge performed financially in Q3 FY25?
The company reported a 10% YoY decline in revenue (₹3,476 crore) and a 16.1% drop in net profit (₹213 crore) due to weaker demand and higher costs.
4. What is Bharat Forge’s long-term growth potential?
With rising defence orders, strong exports, and global expansion, Bharat Forge is expected to be a major player in India’s defence modernization program.
5. Is Bharat Forge’s stock a good investment?
JP Morgan has issued a “Buy” recommendation with a target of ₹1,270 per share, suggesting a 20% upside from current levels.
6. What is the company’s market capitalization?
Bharat Forge’s current market cap stands at ₹57,163 crore.
7. What is the debt-to-equity ratio of Bharat Forge?
The company maintains a debt-to-equity ratio of 1.06, which is manageable given its strong revenue streams.
8. Where does Bharat Forge have manufacturing facilities?
The company operates manufacturing plants in India, Germany, and Sweden, with its Indian facility being the largest single-location forging unit in the world.
Conclusion
Bharat Forge’s latest defence contract approval has reinforced its position as a key player in India’s defence manufacturing sector. Despite recent financial challenges, the company’s long-term prospects remain strong, making it a compelling investment opportunity for growth-focused investors.
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Disclaimer: This blog post is for informational purposes only and should not be considered financial advice. Investors should conduct thorough research and consult with a qualified financial advisor before making any investment decisions.