Defense business unit to hold roadshows in Dubai and Abu Dhabi to lure investors

The centre has asked defence public sector enterprises (PSUs) to hold roadshows in Dubai and Abu Dhabi to share their financial and business plans to attract investors.

Hindustan Aeronautics (HAL), Bharat Dynamics (BDL), Bharat Electronics (BEL), Garden Reach Shipbuilders & Engineers (GRSE) and Mishra Dhatu Nigam (MIDHANI) have informed the stock exchange that they will conduct an investor outing Show plans and participate in the “Non-September 12-15 roadshow and meeting with potential investors.

They’ll share their short- and medium-term growth plans, financial metrics, stock performance/market cap improvements — and all sorts of pitches to potential investors.

While these roadshows are not related to any share offerings by the Centre, they will set the stage for future equity sales by the government. Industry experts have observed that such roadshows could be a prelude to the government’s plans to sell such PSUs.

The roadshow is a step in the Centre’s drive for PSUs to actively engage in dialogue with market participants and inform potential investors of their performance. The step also underscores the Center’s efforts to bring PSUs on par with their private sector counterparts.

The government has taken a series of measures to boost investor confidence in PSU stocks that are undervalued compared to their private peers.

The Ministry of Investments and Public Assets has added new parameters to the PSU MoU signed with the government – which includes holding an investor conference call after announcing quarterly earnings and sharing management’s future plans.

Analyst/investor conference calls have shown results, and the stock price has responded positively to management’s comments.

Other steps taken to improve governance include adhering to better capital management practices, opting for debt financing when needed, rather than using internal accruals to fund projects, etc.

Defense PSUs have consistently outperformed non-defense PSUs, said Harshit Kapadia, vice president and defense sector expert at Elara Capital.

Kapadia added that the government wants to put PSUs on the same footing as their private counterparts. Of the five PSUs that held the roadshow, all but the HAL met the mandatory minimum public shareholding norms. The government owns 75.15% of HAL.

• Shares in the five defense utilities have all made solid returns this year.
• Shares of HAL have risen 112% so far this year.
• Shares of BDL have surged 115% year-to-date.
• Shares of BEL and GRSE are up 60% year-to-date.
• Shares of Midhani rose 13.6%.
• A stake sale in such PSUs could help the government to ramp up divestment efforts as many privatisation proposals are dragging on.
• The centre has accumulated divestment income of Rs 24,543 crore to date, while its target for 2022-23 is Rs 65,000 crore.

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