Garden Reach Shipbuilders soars 13%, hits new high on strong outlook

A strong order book for construction of 16 warships concurrently for Indian Armed Forces at this juncture holds exciting times ahead for the GRSE, the company said

Shares of Garden Reach Shipbuilders & Engineers (GRSE) moved higher by 13 per cent, hitting a record high of Rs 344.15 on the BSE in Wednesday's intra-day trade on the back of healthy business outlook. The stock of the state-owned company, engaged in producing defence platforms, surpassed its previous high of Rs 332.85 touched on April 22, 2022.

At 03:06 pm, GRSE was trading 12 per cent higher at Rs 342, as compared to 0.29 per cent decline in the S&P BSE Sensex. The average trading volumes on the counter more-than-doubled, with a combined 3.1 million equity shares having changed hands on the NSE and BSE till the time of writing of this report.

While the overall Indian shipbuilding industry witnessed healthy growth in the recent past, defence shipbuilding segment looks promising on account of the ship acquisition plans of the Indian Navy and the Coast Guard.

During the financial year 2021-22, GRSE bagged the export contract for 06 Patrol/ Surveillance Boats for Government of Bangladesh for a value of $1.82 million (Rs 13.66 crore approx.).

"A strong order book for construction of 16 warships concurrently for Indian Armed Forces at this juncture holds exciting times ahead for the GRSE. Recent policy announcement by the Raksha Mantri declaring ‘Initial Negative List of 101 items followed by 2nd positive Indigenisation list of 108 items’ in the negative list of imports over next five years in defence segment provides huge opportunities to Indian Industry as part of larger objective of ‘Atmanirbhar Bharat Abhiyan’," the company said in its FY22 annual report.

The defence shipbuilding segment continues to look promising on account of ambitious acquisition plan of Indian Navy and Indian Coast Guard which is quite encouraging for the Indian Shipbuilders and the entire eco-system. A number of Requests for Proposals (RFPs) for various shipbuilding projects have been floated by the MoD during last one year and some more are expected to come out in the near future. Further, the MoD plan to increase export of defence products to $3.59 billion by the end of 2024-25 augurs well for all of us, the company said.

Meanwhile, all defence companies saw a noticeable pick-up in execution, which led to significant increase of in their revenues.

The Indian defence sector is going through a major transformational phase as the government looks committed to reducing imports and increasing indigenisation of various key defence platforms, systems and associated equipment required for these platforms. The share of imports, which is about around 35 per cent of the total defence procurement budget, has come down in the last two to three years.

"It is likely to reduce further in coming years as the government continues to focus on allocating more budget to DRDO for indigenous development of new generation & modernized equipment, sign large scale orders for these equipment/platforms with defence PSUs and encourage more domestic private players, MSMEs and start-ups for manufacturing key components, which India used to import from countries," ICICI Securities said in a defence sector report.