Best Small Cap Defence Stocks in India

The defence sector of any country is one of the most important sectors as it plays a key role in helping a nation safeguard itself. The government of India recognizes the importance of the defence sector and thus has increased allocation to this sector each year. You might be wondering if there are any smallcap firms that manufacture defence-related goods. 

In this blog, we will give you an overview of the leading smallcap firms that manufacture defence-related equipment. Moreover, we will provide the benefits and disadvantages of investing in these stocks along with the future of defence stocks in India.

What are Defence Sector Stocks?

The stock of the companies developing, supplying, and manufacturing equipment related to the defence industry is known as defence sector stocks. The product portfolio of these companies includes military logistics, weaponry, aircraft parts, and surveillance systems. This industry caters to the Air Force, Army, and Navy. Increasing government expenditure and incentive programs have caused the industry to grow rapidly during the last few years. 

List of Small Cap Defence Stock

The list of smallcap defence stocks is given below:

1. Avantel Limited
2. Premier Explosives Limited
3. Astra Microwave Products Limited
4. Krishna Defence and Allied Industries Limited
5. MTAR Technologies Limited
6. Paras Defence and Space Technologies Limited

Company	Current Market Price (₹)	Market Capitalization (₹ crores)	52-Week High (₹)	52-Week Low (₹)
Avantel Limited	176	4,667	191	90.3
Premier Explosives Limited	569	3,059	909	253
Astra Microwave Products Limited	853	8,101	1,060	510
Krishna Defence and Allied Industries Limited	772	1,058	1,130	302
MTAR Technologies Limited	1,605	4,936	2,353	1,495
Paras Defence and Space Technologies Limited	1,094	4,408	1,593	609

Overview of Top Small Cap Defence Stocks in India

An overview of the top smallcap defence stocks in India is given below:

1. Avantel Limited

When the company was founded in 1990, its primary focus was electronics and telecommunications services. The business began concentrating on defence-related equipment, such as satellite communication, in 2000. It specializes in satellite and wireless communication products, particularly for the industrial and maritime defence sectors. It expanded its operations in the aerospace and defence industries starting in 2010. It has an internal design and research team and an ISO-certified quality management system. Their product offerings include data transceivers, GPS receivers, satellite phones, and MSS terminals. The Avantel Limited headquarters is in Hyderabad. 

1Y Return (%)	3Y Return (%)	5Y Return (%)
9.51%	-12.25%	-11.95%

2. Premier Explosives Limited

Dr. A. N. Gupta, a graduate of the Indian School of Mines in Dhanbad, founded Premier Explosives Limited in 1980. It produces high-energy materials, propellants, and industrial explosives for the mining, space, and defence sectors. In addition to developing pyrogen igniters, gas generators, and propellants, it is regarded as the world’s first country to manufacture greener NHN detonators, which replaced the ASA detonators. Later, the business broadened its activities to include infrastructure development and homeland security. The company has partnered with BF Utilities to create BF Premier Energy System Limited to manufacture defence products. With its several manufacturing facilities spread throughout India, including those in Telangana, Madhya Pradesh, Maharashtra, and Tamil Nadu, as well as its NABL-certified laboratories, it made a name for itself in the Indian explosives industry. The company also supplies important parts for the ISRO Polar Satellite Launch Vehicle. The company’s headquarters is in Telangana.  

1Y Return (%)	3Y Return (%)	5Y Return (%)
-3.84%	453.01%	2,136.85%

3. Astra Microwave Products Limited

Astra Microwave Products Ltd. was founded in 1991 and focuses on creating high-performance radio frequency and microwave subsystem solutions. Initially, businesses that concentrated on establishing their telecom base stations were among the company’s first clients. The company began manufacturing radars in collaboration with DRDO later in 1993. The company raised money from the general public to expand its operations and infrastructure, and in 1995, it went public on the Indian Stock Exchange. ISRO invited public participation in the space industry in 2004, which gave them the chance to participate in significant satellite launches in 2008. The business delivered several multipurpose radar systems for Indian defence forces in 2024. The company’s headquarters is in Telangana.

1Y Return (%)	3Y Return (%)	5Y Return (%)
19.46%	221.71%	770.11%

4. Krishna Defence and Allied Industries Limited

The company was founded in 1997 under the name M/s Krishna Industries, with an initial focus on the manufacturing of dairy equipment. The company first ventured into the defence industry in 2006 and began manufacturing shipbuilding steel sections for the Indian Navy. It was incorporated under Krishna Defence and Allied Industries Limited in 2011. The company’s manufacturing facility in Halol is used to manufacture defence and homeland security products. The company’s defence products include shipbuilding steel sections, ballast bricks, IED containment vessels, etc. Its headquarters is located in Mumbai.

1Y Return (%)	3Y Return (%)	5Y Return (%)
6.70%	722.27%	985.40%

5. MTAR Technologies Limited

MTAR Technologies began providing components to ISRO and DRDO in 1970 and was established to meet the demands of India’s nuclear and defence industries. It began expanding its product line into the energy industry in 2000 and manufacturing parts for businesses such as Bloom Energy. The company launched an initial public offering (IPO) and was listed on the Indian Stock Exchange in 2021. The company’s headquarters is in Hyderabad. 

1Y Return (%)	3Y Return (%)	5Y Return (%)
-2.51%	1.71%	64.75%

6. Paras Defence and Space Technologies Limited

Paras Defence and Space Technologies organization was established in 2009 and is regarded as a top space and defence engineering firm. The company specializes in developing products for rockets and missiles, space research, naval systems, electronic warfare, surveillance, electromagnetic shields, etc. The company has a state-of-the-art manufacturing facility and a highly skilled workforce, which results in a high-quality output. The company’s headquarters is in Maharashtra. 

1Y Return (%)	3Y Return (%)	5Y Return (%)
27.84%	95.16%	214.71%

Key Performance Indicators (KPIs) 

Company	Operating Profit Margin (%)	Net Profit Margin (%)	ROE (%)	ROCE (%)	Current Ratio
Avantel Limited	33.74	23.42	32.02	44.35	3.24
Premier Explosives Limited	18.81	10.45	12.87	19.82	1.27
Astra Microwave Products Limited	19.61	11.99	12.53	17.14	2.85
Krishna Defence and Allied Industries Limited	13.65	9.19	9.21	13.43	4.32
MTAR Technologies Limited	16.41	9.66	8.29	11.92	2.72
Paras Defence and Space Technologies Limited	18.13	11.87	7.95	9.80	2.35

Benefits of Investing in Defence Stocks

There are numerous benefits of investing in defence stocks, a few of which are mentioned below-

• Growth Potential – The government’s defence budget is growing annually, which indicates the strong growth potential of the companies in the defence sector. 
• Government Support– Companies in the defence sector generally have government contracts which provide them a steady source of revenue.
• Diversification – Investing in defence sector stocks can help an investor diversify their portfolio and reduce the risk.
• Innovative Technology – The defence sector companies use innovative technologies in areas like aerospace, cybersecurity and the advanced weapons sector.
• Export Opportunities – Companies can take advantage of export opportunities to increase their revenue.

Disadvantages of Investing in Defence Stocks

The significant risks related to investing in defence stocks are as follows-

• Compliances – The laws related to exporting defence-related products are stringent, which can restrict their growth potential.
• Allocation of Budget – An economic downturn can lead to a decrease in government spending on the defence sector.
• Capital Requirement – The companies manufacturing defence products require a substantial amount of capital, which can sometimes lead to high debt levels.
• Regulatory Changes – The defence industry is subject to strict regulations, and any change in government policies can create challenges for the companies.
• Obsolete Technology – Companies must continuously work on developing better products with the latest technologies so that their products don’t get replaced by better products from other companies.

Future of Defence Stocks

India’s defence industry is expanding due to ongoing government assistance through incentive programs and increased spending. Additionally, India has become a significant player in the global defence industry since private investment is permitted in this area. Recent estimates place the value of India’s defence manufacturing industry at about ₹1.3 trillion. The government is launching incentive schemes and increasing the budget allocations to this sector to support the Indian defence industry, ensuring future growth.

Conclusion

In conclusion, investors wishing to participate in India’s growing defence sector may find that smallcap stocks in the defence industry offer attractive investing opportunities. Defence stocks can deliver substantial returns in future due to government support and growing export opportunities. However, investment in defence-related equities has some risks, such as high capital requirements, strict regulatory requirements, etc. It is advised that one should speak with their investment advisor before investing in smallcap defence stocks. 

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