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Revenue Revenue
Mcap Revenue EBITDA Mcap/ CAGR% RoE CAGR%
Company (Rscr) (Rscr) Margin (%) EV/EBITDA EBITDA P/E (FY14-17) (FY14-17) D/E
SAMs Torpedoes Launchers ATGMs Counter measures Decoy systems Test Equipment
systems
Akash Light Launchers Milan 2T, Chaff& flare Submarine Health
Weight for KM & Konkurs-M, based air fired monitoring
Torpedo Milan 2T INVAR (3 defence decoys equipment
ATGMs UBK 20) systems, C- for ATGMs
303 torpedo
decoys
Return On Equity
40
30
20
10
0
FY15 FY16 FY17
Source: RHP, Geojit Research
Industry Outlook
The Indian defence market is in a state of transition, as a result of new policies promulgated by the government. The government is
outlining policies to convert India into a defence hub, with indigenous manufacturing being given the highest priority. Defence exports
will be permitted and foreign direct investment (FDI) holdings have been tweaked to enable more foreign original equipment
manufacturers (OEMs) to set up ventures in India. Several multi-billion dollar projects are expected to come to fruition. A few of these
projects will be executed through government-to-government (G2G) and off-the-shelf purchases; however, the majority will be through
partnerships between indigenous companies and foreign OEMs. Offset regulations are being relaxed to speed up procurements and
provide flexibility for suppliers while approaching tenders. The focus is on fast-track deals, tailored projects with Indo-foreign OEM
partnerships, and involving micro, small, and medium enterprises.
India has been successful in developing many defence systems with high value export potential. The BrahMos cruise missile system and
the Akash surface to air missile systems are examples. The nation has decades of experience operating and upgrading Russian platforms
with indigenously produces subsystems such as sensors, avionics and spares. Thus, apart from export of full-fledged systems, subsystem
solutions can also be exported. India has finalized a contract for the export of light torpedoes with a foreign company. Several lesser
developed nations in East Asia and APAC region such as Vietnam, Philippines and Indonesia are upcoming markets for sale of missile
systems and offshore patrol vessels. Countries like UAE, Chile, South Africa and Vietnam have evinced interest in procuring the
BrahMos missile system. Main target markets for India’s exports will remain low and medium defence budget nations in the APAC,
Latin America, East Asia and Middle East regions. However, success in exports will be contingent upon demonstrating credibility of the
solutions developed.
S‐400 Triumf Procurement: India and Russia have reached an agreement worth over US$5bn for procuring the S ‐ 400 Triumf air defence
system. The contract is being executed by Russia’s arms export monopoly ‘Rosboronexport’. The deliveries are expected to be completed
within three years from agreement.
Akash Missile Procurement: The Cabinet Committee on Security (CCS) is set to clear the procurement of Akash missiles for the Air
defence systems of the Indian Air Force, enhancing the supersonic missile capability to intercept fighter jets, cruise missiles; ballistic
missiles etc. A ballistic missile system is a missile delivery system which follows a ballistic trajectory.
Barak- 8: India’s CSS has approved the procurement of MRSAM (Medium range/Long range (Naval version)) SAM systems, further
strengthening the defence capabilities to intercept aircraft, UAS and missile systems. Based on the ‘Make in India’ initiative, IAI has
partnered with Indian organisation DRDO for co‐development of both long range(Naval) and medium range(Land) versions of the
missile. BDL is manufacturing the missiles in India.
VSHORADS Procurement: Field trials for a US$5.2bn weapon systems procurement contract are underway at present. The total contract
is for the supply of 5,175 missiles and 1,276 single and multi‐launchers with streamlined technology transfer for the Defence Public Sector
Undertakings. Three international companies are participating, namely MBDA, Saab and Rosboron export. BDL is the nominated
production agency for the program.
Barak – I Procurement: The Indian government has approved the procurement of Barak – 1 missile system. The contract is worth over $
78Million and will be delivered over a period of 5 years from 2017 onwards.
The Guided Missile and Torpedo Market – India
The Indian Guided Missile and Torpedo market landscape consists of two main types of suppliers at present - DPSUs with indigenous
Research Development Testing and Evaluation (RDTE) and manufacturing capabilities and foreign players which export their missile
systems to India. There is also an emerging category – the Indian private sector teaming up foreign established defence experts to
manufacture missile systems in India. This category is still in its infantile stages.
Guided Missiles Market Split (2017-26) Tactical Segment market split (2017-26)
7%
1% 3% Ballistic
9%
3% Surface to Surface
Tactical 31%
80% 50%
Surface to air
Cruise
7%
Air to Air
Special mission 9%
ATGM
Torpedo
Air to surface
The Indian missile market today is dominated by DPSU produced missiles and foreign solutions at present. However, there is a drive
within the establishment to indigenize missile production as much as possible in order to extricate the armed forces from any external
dependencies for missile systems in the future. The goal is to aim for complete in house missile production and maintenance. BDL
maintains all Indian missile systems and selected foreign missile systems at present. Solutions from Russia, Israel, Europe and US are
well entrenched in the Indian market. At present, indigenous development and manufacturing is carried out by three DPSUs – DRDO,
BDL, and BEL. Amongst the three BDL is the main player in manufacturing and is the sole manufacturer in India for SAMs, torpedoes,
ATGMs. There are many opportunities in the Indian market which will be up for grabs in the future. These opportunities, coupled with
the ‘Make in India’ initiative and DPP 2016 has stimulated an interesting market dynamic in India. Foreign OEMs accord high priority to
the Indian market because of assured opportunities but has come to realize that partnering with DPSUs and private companies is the
way ahead. This has resulted in many partnerships in the field, as well as stand-alone indigenous development.
Future outlook
Frost & Sullivan has estimated the total Indian guided missile and torpedo market to be worth $ 24.49 Billion. 79% of the market
valuation remains unaddressed and $19.41 Billion worth of opportunities will emerge in the 2017-26 time-frame. Armed forces
modernization and new procurements in terms of fighters, IFVs, submarines, corvettes, frigates etc. will in turn drive procurement of
guided missile and torpedo systems. The ballistic missile system segment is expected to remain exclusively with DPSUs / GoI. DPSU
players such as BDL have strong track record of guided missile production with a well reinforced and holistic value chain in the same.
BDL is also expanding production capacities to make way for export and emerging internal demand and thus stand to gain in the short
and medium-terms. As the resource-rich private sector plays catch up with DPSUs in guided missile production during the initial few
years of the forecast, DPSUs such as BDL must broaden product portfolios, improve product-line depth to field missiles with varied
ranges, and incorporate modern technologies such as interchangeable warheads etc. to future proof product offerings against the
onslaught of private competition.
Promoter and promoter group
Promoter of the company is the President of India acting through the Ministry of Defence. The promoter, along with its nominees,
currently holds 100% of the pre-offer equity share capital of the company. After this Issue, the promoter shall hold 87.75% of the post
offer paid-up equity share capital of the company.
V. Udaya Bhaskar is the Chairman and Managing Director of the Company. He has been associated with the Company in the capacity of
a Chairman and Managing Director since January 30, 2015. He holds a bachelors degree in Technology in Plastics Technology and
Chemical Engineering from H.B Technological Institute, Kanpur University and holds masters degree in Technology ‘Polymer Science &
Technology’ from Indian Institute of Technology, Delhi. He joined the Company in the year 1990 prior to which he was associated with
Bakelite Hylam Limited, Dytron (India) Limited and SIP Resins Limited.
S. Piramanayagam, is the Director (Finance) and Chief Financial Officer of the Company. He has been on the board of the Company since
January 01, 2015. He holds a bachelors degree in Science from Madurai Kamraj University and is an associate member of the Institute of
Chartered Accountants of India. Prior to joining the Company, he has worked as a general manager (finance) of M/s. BEML Limited. He
has also worked at Neyveli Lignite Corporation Limited (now known as NLC India Limited) for ten years in the middle management
cadre.
V. Gurudatta Prasad, is the Director (Production) of the Company. He has been on the board of the Company since September 10, 2015.
He completed his Bachelors in Mechanical Engineering from Bangalore University and holds a degree in M. Tech (Industrial Engineering
& Management) from the Jawaharlal Nehru Technological University, Hyderabad. He has been associated with the Company since 1986
and prior to his appointment as Director (Production), he served as the General Manager at the Company’s office in Bhanur in the
capacity of Unit Head.
K. Divakar, is the Director (Technical) of Company. He has been on the board of the Company since July 01, 2016. He holds a degree of
Bachelors of Technology in the field of Mechanical Engineering from Jawaharlal Nehru Technological University, Andhra Pradesh and
has completed the post graduate course in tool, die and mould design from Central Institute of Tool Design, Hyderabad. He has been
associated with the Company since 1988. Prior to his appointment as Director (Technical), he served as the General Manager (Design &
Engineering), headed the Milan, Refurbishment and Explosive Divisions and played an instrumental role in establishing the naval
division of the Company at Vishakhapatnam. He is experienced in various areas of missile production.
Financials
Y.E March (Rscr) FY15 FY16 FY17 H1FY18 Y.E March (Rscr) FY15 FY16 FY17 H1FY18
Sales 2,841 4,079 4,833 1,806 Cash 123.9 232.5 46.2 466.1
% change - 44% 18% -25%* Accounts Receivable 335 145 356 130
EBITDA 275 513 568 245 1476 2058 2251 2156
Inventories
% change - 87% 11% -14%* 4942 4722 3081 2394
Other Cur. Assets
Depreciation 67 53 62 30
Investments 741 1488 1729 1919
EBIT 208 460 506 215
3 4 4 2 Net Fixed Assets 388 558 605 599
Interest
Other Income 439 385 230 75 CWIP 135 125 130 176
PBT 644 841 732 288 137 140 161 161
Intangible Assets
% change - 31% -13% -21%*
Other Assets 94 96 89 88
Tax 200 279 242 115
Total Assets 8412 9641 8601 8285
Tax Rate (%) 31.1% 33% 33% 40%
Reported PAT 444 562 490 173 Current Liabilities 4532 6042 5115 5123
Adj Provisions 256 411 693 1027
Adj PAT 444 562 490 173 Debt Funds 1971 1318 581 504
% change - 26.7% -12.8% 30%* - - - -
Minority Interests
No. of shares (cr) 18.33 18.33 18.33 18.33
Def.Tax - 18 - -
Adj EPS (Rs) 24 30.7 26.8 18.8*
- 26.7% -12.8% -30%* Equity Capital 115 98 122 92
% change
*Annualised Reserves & Surplus 1538 1753 2090 1539
Shareholder’s Fund 1653 1851 2212 1631
Total Liabilities 8412 9641 8601 8285
BVPS (Rs) 90 101 121 89
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Geojit Financial Services Ltd. (formerly known as Geojit BNP Paribas Financial Services Ltd.), Registered Office: 34/659-P, Civil Line Road, Padivattom,
Kochi-682024, Kerala, India. Phone: +91 484-2901000, Fax: +91 484-2979695, Website: geojit.com. For investor queries: customercare@geojit.com, For
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Corporate Identity Number: L67120KL1994PLC008403, SEBI Regn.Nos.: NSE: INB/INF/INE231337230 I BSE:INB011337236 & INF011337237 | MSEI:
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