Begin typing your search...

Experts: Defence Proposals Worth ₹54,000 Crore is Set to Boost Projections

The Defence Acquisition Councils’s (DAC) go-ahead to capital acquisition proposals, valued at ₹54,000 crore, and the proposed reforms in the process is believed to be a ‘big plus’.

Experts: Defence Proposals Worth ₹54,000 Crore is Set to Boost Projections

Experts: Defence Proposals Worth ₹54,000 Crore is Set to Boost Projections
X

24 March 2025 12:04 PM IST

The Defence Acquisition Council’s (DAC) go-ahead to capital acquisition proposals, valued at ₹54,000 crore, and the proposed reforms in the process is believed to be a ‘big plus’. As per an analysis report, ICICI Securities said, “We see both orders and AoNs picking up again in Q4FY25 and believe FY26 would be much better if reforms in the capital acquisition process are implemented.” Previously on March 20, the DAC granted the Acceptance of Necessity (AoNs) to eight proposals, totalling over ₹54,000 crore, while also approving guidelines to reduce timelines of acquisition.

Overview of AONs

Ministry of Defence disclosed three proposals:

1. To upgrade the present 1000 HP Engine for the T-90 Tanks, the DAC approved AoN for the procurement of 1350 HP Engine. The Ministry of Defence said, “This will enhance the battlefield mobility of these tanks especially in high-altitude areas by increasing the power to weight ratio.”

2. For the Indian Navy, AoN for procurement of Varunastra Torpedoes (Combat) was granted by the DAC. Developed by Naval Science & Technological Laboratory, Varunastra Torpedo is an indigenously-developed ship-launched anti-submarine torpedo.

3. For the Indian Air Force, AoN for procurement of Airborne Early Warning & Control (AEW&C) Aircraft Systems was accorded by DAC. As per the ministry, AEW&C systems are capability enhancers which can change the complete spectrum of warfare and exponentially increase the combat potential of every other weapon system.

ICICI Securities said, “In our view, BEL is likely to benefit with a rub-off effect on the companies in the radar ecosystem, such as Astra Microwave. Thus far in FY25, AoNs (cumulative) worth ₹2.5 trillion have been issued, still lower than FY24 (₹3.53 trillion) and FY23 (₹2.6 trillion).”

Reduction in timeline

In an effort to reduce the timelines at various stages of the capital acquisition process, the DAC approved guidelines to make this process faster, effective and efficient. As per the media reports, the guidelines aim to trim down the average acquisition timeline to 24 weeks (6 months) from 96 weeks (two years).

ICICI Securities, “Key points: 1) Preparation of Request for Proposal (RFP) at the same time the AoN for any acquisition is sought; 2) conducting Field Evaluation Trials under simulated conditions, instead of polar and desert conditions. This would boost the requirement of simulators; and 3) Contract Negotiation Committee (CNC), which finalises pricing with suppliers, will now have a maximum of six months to complete its process. In our view, this could have a significant positive impact in defence preparedness.”

In recent times, several orders have faced delays. Therefore, tightening the acquisition process would eliminate investors’ worry related to the delays in defence contracts.

Outlook

ICICI Securities are of the opinion that the proposed reforms come at a time when orders are getting delayed and investors are concerned about the timelines. “With major orders, such as Rafale-N, Predator drones, additional Scorpene-class submarines, Nex-gen Corvettes, QRSAM, additional 97 Mk-1As and 156nos. LCH Prachand expected to be awarded in the next couple of years, we believe reduced timelines could play a major role in restoring the confidence of the street.”

Apart from the current AoN, Cabinet Committee of Security (CCS) gave a go-ahead for the procurement of indigenous ATAGS worth ₹70 billion. Amid positivity in momentum and efficiency in the capital acquisition process, FY26 is set to be an interesting year for the defence sector, ICICI Securities estimated.

It concluded, “Our top picks in the sector are: Solar Industries (BUY; TP: Rs 13,720), PTC Industries (BUY; TP: Rs 20,070) and Azad Engineering (BUY; TP: Rs 2,350). However, we believe the current AoN is likely to be beneficial for BDL (TP: Rs 1,400), BEL (TP: Rs 350) and Astra Microwave (TP: Rs 935) – all BUYs.”

DAC capital acquisition proposals Rs 54 000 crore reforms process AoNs Indian Army Indian Navy Indian Air Force HP Engine T-90 Tanks Varunastra Torpedoes AEW&C Aircraft Systems ICICI Securities radar ecosystem BEL Astra Microwave acquisition timeline Request for Proposal Field Evaluation Trials Contract Negotiation Committee defence preparedness Rafale-N Predator drones Scorpene-class submarines Nex-gen Corvettes QRSAM Mk-1As LCH Prachand ATAGS Solar Industries PTC Industries Azad Engineering BDL 
Next Story
Share it