Smallcaps that Could Launch Made in India Rockets

In the recent years, we have seen Make in India policy bring fortunes to the many EMS companies - Dixon, Amber, PG Electroplast, and EPack Durables.

But its most critical beneficiary have been the defense stocks.

Ahead of the budget, a recent announcement suggests another step ahead in self sufficiency.

The Cabinet Committee on Security, has cleared India's largest domestic contract for ammunition. Rockets worth over Rs 100 bn will be made in India to cater to the Army's needs over the next decade.

It is the private entities - Economic Explosives Ltd and Munitions India Ltd that have bagged the order. They will be using DRDO developed technology for the mission.

The order is for the Pinaka rocket system - the indigenously developed rocket launcher system that can fire multiple rockets in a short time frame.

The Make in India push for the rockets and their launching systems has many beneficiaries in the listed space.

Solar Industries, Premier Explosives, Bharat Electronics Ltd are some of the well tracked names in this theme.

Solar Industries is targeting a fifth of its revenue this year from the defense sector. The management mentioned in last quarter's earnings call that they are expecting the Pinaka order.

Bharat Electronics is an indirect player. It supplies some subsystems related to communication interface.

However, I want to share more of smallcap opportunities in this ecosystem.

Two smallcap companies that deserve a mention are Goodluck India and Nibe Ltd.

Goodluck India, founded by IIT alumni is led by a first generation techpreneur. It primarily operates in steel industry and offers cold rolled sheets and tubes, precision forgings, and metal forging solutions used in auto, aerospace, oil and gas etc.

From a regular steel product maker, it is evolving as a premium provider of engineering solutions.

In FY23, it added machines that increased capacity of forging single piece to 14,000 kg and total capacity per annum to 30,000 MT. This has helped move further into value added products, including in defence applications. Almost half of its capacity is towards high margin, value added products.

The company supplies to HAL, DRDO, ISRO, BEML, Mazgaon Dock Shipbuilders, Walchandnagar Inds, Godrej Aerospace and L&T.

Besides, it is a supplier to prestigious defence programs like BRAHMOS Missiles and Pinaka rockets and indigenous rocket launcher. Defence makes 2% of its revenue. However, the mix could look different in the coming years.

It has a subsidiary - Goodluck Defence and Aerospace. Here, it is setting up a facility at an investment of Rs 2 bn to cater to the needs of aerospace and defence industry. This will be commissioned by the end of FY25. The management expects its products to be a gamechanger for the company, and see a significant improvement in margins.

The defence plant, once operational has the potential to contribute to Rs 3-3.5 bn.

The company has a marketcap of Rs 28 bn, with trailing 12 month revenue at Rs 37 bn and EBITDA margin about 8%. Its return ratios are north of 15% and debt to equity is comfortable. The stock is trading at a PE of 18.5 times.

Nibe Ltd is another candidate worth digging further into. The company caters to EV and defence industry, and makes products that go into Pinaka Launching System.

It has executed an exclusive manufacturing agreement with Munition India Ltd for export of ammunition.

Its return ratios and debt to equity are comfortable. Its PE ratio at 60 times is on the higher side, but a sharp growth in earnings has limited the price earnings to growth (PEG) ratio to well below 1.

Do note that no view is implied on any of these stocks. The information above is for educational purpose.

I believe these will be good candidates to keep on your watchlist as India aspires for self sufficiency in defence.

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Warm regards,


Richa Agarwal
Editor and Research Analyst, Hidden Treasure
Equitymaster Research Private Limited (formerly Equitymaster Agora Research Private Limited) (Research Analyst)