India’s Defence Sector: Investors Eye Promising Shipbuilders

India is embarking on a transformative journey in its defence sector, with the government allocating nearly Rs 700,000 crore to bolster military capabilities. Amid this backdrop, two state-owned shipbuilding companies are drawing significant interest from savvy investors. Both firms have demonstrated impressive profit growth and boast robust order books exceeding Rs 21,000 crore, making them attractive options for those looking to capitalize on the government’s commitment to national security.

Garden Reach Shipbuilders & Engineers Ltd: A Leader in Shipbuilding

Established in 1934, Garden Reach Shipbuilders & Engineers Ltd (GRSE) stands as a premier shipbuilding entity under the Ministry of Defence. The company primarily serves the Indian Navy and Coast Guard, holding a market capitalization of Rs 27,775 crore. Notably, the President of India holds a 74.5% stake in GRSE through the Ministry of Defence.

GRSE has achieved remarkable financial performance, with a Return on Capital Employed (ROCE) of 37%, significantly higher than the industry median of 19%. This indicates that for every Rs 100 invested, the company generates Rs 37 in profit, compared to just Rs 19 for the industry average. The company’s sales surged from Rs 1,433 crore in FY20 to Rs 5,076 crore in FY25, reflecting a compound annual growth rate of approximately 29%.

Furthermore, GRSE’s EBITDA grew at a compounded rate of 59%, climbing from Rs 42 crore in FY20 to Rs 421 crore in FY25. Net profits also saw a substantial increase, tripling from Rs 163 crore to Rs 527 crore during the same period, achieving a compounded growth rate of 27%. The stock price has skyrocketed from around Rs 213 in August 2020 to Rs 2,425 as of August 26, 2025, marking an impressive 1,040% increase over five years. Currently, the stock trades at a 30% discount from its all-time high of Rs 3,538.

With a strong order book and ongoing projects, GRSE is well-positioned for future growth. The company is actively pursuing new business opportunities in both defence and non-defence sectors, including exports. Its management remains optimistic, emphasizing a commitment to innovation and technology in shipbuilding.

Cochin Shipyard Ltd: A Steady Performer in Shipbuilding

Founded in 1972, Cochin Shipyard Limited (CSL) is a prominent player in the construction and repair of various vessels. With a market capitalization of Rs 43,192 crore, CSL has built and repaired some of the largest ships globally, exporting around 45 vessels to international clients. The President of India holds a 68% stake in CSL, with the Life Insurance Corporation of India owning an additional 3.05%.

CSL’s financial metrics indicate a solid performance, with a current ROCE of 20%, closely aligning with the industry median of 19%. The company’s sales increased from Rs 3,422 crore in FY20 to Rs 4,528 crore in FY25, reflecting a compound growth rate of 6%. EBITDA rose from Rs 714 crore to Rs 873 crore during the same period, while net profits grew from Rs 610 crore to Rs 843 crore, also at a compounded rate of 6%.

The stock price of CSL has risen from approximately Rs 177 in August 2020 to Rs 1,642 as of August 26, 2025, representing an 828% increase. However, this growth has occurred despite modest sales and profit increases. Currently, the stock is trading at a 45% discount from its all-time high of Rs 2,979, with a price-to-earnings ratio of 51x, slightly above the industry median of 50x.

ABS Signs Milestone MOU with Indian Innovators to Drive Global Hub for Green Shipbuilding

CSL is entering a phase of capacity expansion, supported by favorable government policies and international partnerships. While the company anticipates a normalization of margins in FY26, it remains well-positioned to seize opportunities in both defence and commercial shipbuilding, backed by significant investments in infrastructure and technology.

Investment Outlook: A Promising Future?

With impressive returns on capital employed of 37% and 20% respectively, Garden Reach Shipbuilders & Engineers Ltd and Cochin Shipyard Ltd are capturing the attention of discerning investors. Both companies maintain robust order books exceeding Rs 21,000 crore and have consistently delivered operating profits, supported by the Indian government’s commitment to enhancing national defence capabilities.

As both firms embark on accelerated growth trajectories, they are poised to benefit from the government’s focus on self-reliance in defence. Investors are encouraged to monitor these companies closely, especially given their current stock prices, which are trading at significant discounts. The future performance of these shipbuilding giants will be crucial not only for their investors but also for the broader economy.