BDL shares dropped as much as 2.9% to Rs 1,837.10 on the BSE, extending Thursday’s 2.2% fall. Shares of Mazagon Dock slipped 3.4% to Rs 3,150.05, while GRSE declined 3.3% to Rs 2,800.10. BEML shares edged 3.4% lower and HAL shares were down 1.9% at Rs 4,820. The Nifty defence index was down 2.3% on the day.
The declines come after strong gains in recent months, fuelled by sectoral tailwinds such as Operation Sindoor, heightened global military expenditure, and the Iran-Israel conflict. Stocks like GRSE and Mazagon Dock had rallied as much as 80% over the past three months, while BDL shares have surged over 69% year to date. HAL and Mazagon Dock shares are up 19% and nearly 46%, respectively, in 2025 so far.
Ceasefire signals and sector cool-off
A potential ceasefire in Gaza also contributed to the pullback in defence names. U.S. President Donald Trump this week hinted at a possible deal between Israel and Hamas, even as Israeli Prime Minister Benjamin Netanyahu visited Washington. The easing of tensions in the Middle East, particularly between Israel and Iran, had already begun to dampen sentiment earlier this week.
Valuation worries add to pressure
The recent downgrade of BDL by Motilal Oswal further weighed on the stock. On Thursday, the brokerage initiated coverage on Bharat Dynamics with a ‘neutral’ rating and a target price of Rs 1,900, nearly 4% below its then market value, citing “lofty valuations”.While the brokerage applauded BDL’s strong order pipeline and export growth, it noted that the stock’s sharp run-up leaves “little room for near-term upside.” It stated it would “look for lower price points to enter the stock”.Motilal Oswal expects BDL to post a 35% revenue CAGR and 51% PAT CAGR over FY25–28, aided by a ramp-up in execution as supply chain pressures ease. “We like the business model of BDL and its ability to scale up its revenues and order book in current scenario,” the brokerage said, but flagged that the stock is already trading at 70x/52x/38x FY26/FY27/FY28 earnings, calling the valuations “fair”.
BDL’s export revenue jumped to Rs 12 billion in FY25 from Rs 1.6 billion in FY24, led by orders for Akash, Astra, and Helina missile systems. The firm has export clearances for the Akash Weapon System to nine countries and is seeing fresh interest in torpedoes and air-to-air missiles.
Its current order book stands at Rs 227 billion, with a potential addressable market of Rs 500 billion in coming years, including large deals for the QRSAM, Astra Mk1, and long-range SAM system under Project Kusha.
The company has also indigenized 80–90% of several missile platforms and is collaborating with DRDO on around 40 development programmes. EBITDA margins are expected to remain in the 24–26% range, helped by backward integration and product mix.
Despite the growth potential, risks remain. These include “reprioritisation of India’s defence budget, delays in execution, and any changes in procurement policy,” Motilal Oswal warned. The brokerage also cited continued supply chain sensitivities due to BDL’s global vendor exposure.
While the macro backdrop, including NATO’s 5% defence spending target by 2035 and recent Defence Acquisition Council approvals worth Rs 1 trillion, remains supportive, recent market action shows that investors may be seeking more attractive entry points after a steep run-up in stock prices.
Also read | Motilal Oswal see 4% downside for Bharat Dynamics, starts coverage with neutral call amid lofty valuations
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