Why Avantel Share Price is Rising

Last week, more than 45 smallcap stocks gained between 10% to 30%.

This surge coincided with the BSE Sensex marking its third consecutive weekly gain.

Despite reaching record levels, the upward momentum in smallcap stocks continues to capture investors' attention.

Within the smallcap space, defence stocks, in particular have seen a remarkable surge in their stock prices, driven by robust order wins, increased budget allocations, and the government's emphasis on reducing defence imports and promoting domestic procurement.

Avantel, in particular has benefited from the surge in defence stocks and the ongoing rally in small caps.

The stock rallied 9% in a single day on Friday last week.

Here are the reasons behind the rally.

#1 Bonus shares allotment

Avantel witnessed a remarkable uptick in its share value, reaching a fresh 52-week peak and triggering a 10% upper circuit on 24 November 2023. This notable increase coincided with Avantel shares going ex-bonus in a 2:1 ratio.

The company distributed 162,179,720 equity shares with a face value of Rs 2 each through a bonus issue.

Under the ex-bonus arrangement, shareholders received two new fully paid-up equity shares at the face value of Rs 2 each for every share they held.

#2 Back-to-back order wins

Avantel has secured a deal with Cochin Shipyard Limited, getting a purchase order valued at Rs 176.4 million (m). The order involves providing 1 KW HF and SATCOM equipment for communication purposes.

Avantel will fulfil this order between 1 October 2026 and 30 November 2029, spanning three years.

This marks a significant development for Avantel, as the order is a substantial contract for the supply of communication equipment, adding to its business over the next three years.

Further, Avantel also received another purchase order worth Rs 16.1 m from Satish Dhawan Space Centre. This order is for the supply of ATE for radar equipment and is scheduled to be executed by 2 July 2024, within a six-month timeframe.

These back-to-back order wins showcase the company's strong performance and future revenue potential, attracting investor confidence and driving up the share price.

What Next for Avantel?

Given its focus on niche products, established track record and strong R&D facilities, Avantel has a leg-up compared to peers.

A recent report by rating agency ICRA also states that private sector firms are likely to get defence contracts worth Rs 600 billion (bn) in the financial year 2024-2025.

As and when Avantel gets more orders, the revenue visibility is expected to be stronger than ever.

There's also increase in defence budget allocations, which continues to aid the overall positive sentiment in the defence sector.

Apart from positives of the defence budget, Avantel continues to thrive from the positive developments in the space sector.

The company's management has said that the Indian National Space Promotion and Authorization Center and Indian Space Association (ISpA) have received great interest in non-government entities participation in the Indian space technology domain.

Many factors indicate that Avantel could potentially grow rapidly over the next few years.

Surprisingly though, the smallcap stock has not yet received the attention it deserves from foreign investors or domestic mutual funds.

FII holding and mutual fund holding in the company continues to remain nil as of September 2023. Promoter holding stands at 40.1%.

How Avantel Share Price has Performed Recently

In the past five days, Avantel share price is up 9%. In the month gone by, the stock has gained 22%.

While in the past one year, Avantel shares are up over 340%.

Avantel touched a 52-week high of Rs 128.6 on 24 November 2023 and it has a 52-week low of Rs 21.9 on 22 December 2022.

About Avantel

Avantel has an established track record of over two decades in the electronics and telecom equipment business.

This enables the company to offer a unique combination of embedded systems and related software used in the defence sector, as well as RF systems used in the civilian telecom segment.

Presently, the company is in the process of enhancing its portfolio and developing SCA compliant software defined radios, high power HF systems, air defence radars and small satellites.

To know more, check out Avantel's financial factsheet and its latest quarterly results.

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