Defence Stocks Stay Under Pressure, Sectoral Index Down 2% Despite BEL Q1 Boost — Here's Why

Defence sector stocks have been under selling pressure, with the Nifty Defence index slipping as much as 2% on Tuesday. The sectoral index has now lost nearly 5% over the past week, while shares are down over 10% in the past month.

The weakness comes even as sector heavyweight Bharat Electronics Ltd. delivered a strong operational performance in the April–June quarter. However, lacklustre earnings from other defence names like IdeaForge Technologies, Mazagon Dock Shipbuilders, and Paras Defence & Space Technologies appear to have weighed on overall sentiment.

BEL reported a 4.6% year-on-year rise in revenue at Rs 4,439.74 crore, slightly below street expectations of Rs 4,794 crore. Despite the miss on topline, the company delivered a 31% jump in Ebitda to Rs 1,238.27 crore well ahead of the Rs 1,119 crore estimate on the back of improved operational efficiency.

Margins expanded to 27.9% from 22.3% a year ago. Net profit rose 23% to Rs 969.91 crore, comfortably beating estimates of Rs 906 crore.

In sharp contrast, drone manufacturer IdeaForge Technologies Ltd. saw its revenue from operations fall 85.1% year-on-year to just Rs 12.7 crore in the June quarter, compared to Rs 86.2 crore a year ago. The company posted a net loss of Rs 23.5 crore in the quarter, reversing from a Rs 1.1 crore net profit in the same period last year.

Shipbuilder Mazagon Dock posted an 11.4% annual increase in revenue to Rs 2,625.59 crore, but the figure missed Bloomberg estimates of Rs 2,828 crore.

Ebidta declined sharply by 53% to Rs 302 crore, versus an estimate of Rs 616 crore. Ebitda margin contracted to 11.5% from 27.2% last year. Net profit fell 35% year-on-year to Rs 452 crore, significantly below the expected Rs 695 crore.

Paras Defence & Space Technologies Ltd. posted a 11.5% rise in revenue to Rs 93.2 crore from Rs 83.6 crore in the year-ago quarter. However, Ebitda dropped 9% year-on-year to Rs 22 crore, and margins narrowed to 23.6% from 28.9%. Net profit was flat at Rs 14.9 crore, indicating limited bottom-line expansion despite revenue growth.

Zen Technologies Ltd. shares were locked in the lower circuit for the second consecutive session, falling 10% over the last two days and down 19% in the past month, as concerns over a sustained slowdown in order momentum weighed on sentiment.

The company has now seen order inflows slow for the fifth straight quarter, with management indicating that the fiscal could remain muted, though they expect inflows to pick up in the next quarter.

For the June quarter, Zen Tech reported a 37.9% year-on-year decline in revenue to Rs 158 crore, while Ebitda fell 41.9% to Rs 64.7 crore. Margins contracted 280 basis points to 40.9%, and net profit dropped 37.8% to Rs 47.8 crore, also impacted by a high base due to elevated other income in the quarter under review.

The Nifty Defence Index ended 0.34% lower as compared to a 0.57% gain in the benchmark NSE Nifty 50.