By suhel khan
India has been very clear about one thing in the last decade. This is not the same country that used to be a few decades ago. It is not only emerging as a financial super power, but is also emerging as a strong power in terms of national security. If you look at the recent budget, the government has allocated Rs 6.81 lakh crore for the Defense Sector, which is the highest allocation for this sector so far.
Out of this, Rs 1.80 lakh crore has been allocated under the Capital Budget of Armed Forces, in which modernization has been prominently noticed and Rs 1.12 lakh crore has been set for purchase from domestic industry. There is no doubt that promoting defense will be one of the biggest priorities for the government and the country.
At such a time, it is very interesting to look at the defense shares, which have already been caught by India’s Warren Buffett or India’s super investors. These super investors, known for their habit of early identifying the market winners, have already placed their bets on some companies, which is a sign of faith in their long -term possibilities given heavy budgetary investment. Can these smallcap stocks become the next multibagger?
#1. C2C Advanced Systems Ltd (CASL)
CASL is an antagrated defense electronics solution provider, which meets the needs of indigenously developed defense product industry in India.
With a market cap of Rs 1,248 crore, the Casl Air, Sea and land defense platforms specialize in vertically antigrated defense electronics solutions. The company develops ownership software-operated systems and sub-systems, availing AI / ML, Big Data Analytics, IIOT and embedded system.
CASL raised Rs 99 crore through its IPO and had a list in November 2024.
According to the exchange filing by CASL for the quarter ended 31 December 2024, prominent investors Ashish Kacholia and Mukul Aggarwal bought 2.59% and 1.86% stake in the company after the listing.
CASL sales have increased from Rs 1 crore in financial year 2021 to Rs 41 crore in FY 2024, which is a compounded growth of about 236 percent.
In FY 2021, the company’s EBITDA increased by zero to Rs 12 crore in FY 2024.
The company’s net profit has also increased. The company, which recorded a loss of Rs 2.4 crore in FY 2021, earned a profit of Rs 10.12 crore in FY 2024.
If you add a big boom in sales and net profit as well as bouncing in Ebitda (earnings bourge interesting, tax, diplomacy and amortilage), it becomes clear what the attention of Kacholia and Aggarwal went to.
Listing at a price of about Rs 450 in November 2024 and on closing on 7 February 2025, C2C’s stock price was Rs 750, which is an increase of 67% in just 2 months.
The current PE of the stock is 101x, while the industry average is 87x.
The amount raised through the CASL IPO will be used to procure the current operations (upgradation of the existing experience and the installation of the training center in Bangalore) and the proposed XPperian Center in Dubai for the purchase of FICSD assets. Also, funds will be used for working capital requirements.
#2. DCX Systems Ltd (DSL)
In 2011, incorporated, DCX Systems Limited System is in the business of antagration and cable and wire harnerings.
With a market capitalization of Rs 3,425 crore, DSL Foreign Original Ecuity is a highly rejuvenated Indian offset partner (“IOP”) for manufacturers (“OEMS”), especially in the aerospace and defense manufacturing sector. This ELTA Systems Limited and Israel Aerospace Industries Limited for the Indian Defense Market for the construction of Electronic Sub-System and Cable and Wire Harnes Assembly, System Missile and Space Division (simultaneously, “IAI Group”), the largest Indian for Israel One of the offset partner (“IOP”).
Ajay Upadhyay, a super investor who has been included in India’s Warren Buffett and widely followed, who has 17 shares worth about Rs 1,080 crore, is holding a stake in the company with some quarters. By the quarter ended December 2023, Upadhyay had a 1.24 per cent stake in the company, which has increased to 2.86 per cent continuously by the quarter ended December 2024.
The company’s sales were Rs 300 crore in FY 2019, which increased to Rs 1,423 crore in FY 2024, causing its CAGR to 37 percent in 5 years. In the first 3 quarters of FY 2025 (April to December 2024), the company has already registered a sales of more than Rs 616 crore.
EBITDA increased from Rs 5 crore to Rs 70 crore in FY 2024 in FY 2019, which means that it is growing at a compounded annual rate of about 76 per cent.
In FY 2019, the company’s profit has increased from Rs 5 crore to Rs 68 crore in FY 2024, which is a compounded growth of 72 percent. Between April and December 2024, the company has registered a profit of Rs 27 crore.
DSL was listed at around Rs 307 in November 2022. It is currently at the same level. On the closing of 7 February 2025, the stock price was Rs 307, that is, it has been flat growth.
The company’s stock is currently trading at 66x’s PE, while the average of the industry is 76x as compared to competitors. Although the company’s calculations of 10-age median PE are still hurry for the company, but the 10-age of the industry is around 31x.
According to the company’s last Investor Presentation released in November 2024, DSL will focus especially on Technology Transfer (TOT) from the US and Israel. Also, the company aims to get TOT of products from the list identified by the government of indigenous products, which cannot be imported and should be manufactured in India itself.
Ready to earn a war profit?
It is interesting to see that investors like Ashish Kacholia, Mukul Aggarwal and Ajay Upadhyay have the real talent to recognize high possibilities from far away. He has clearly preferred C2C Advanced Systems Limited (CASL) and DCX Systems Limited (DSL), and it is easy to see why it is so. Both companies are showing impressive growth in sales and profits, and they are fully prepared to benefit from India’s efforts for self -sufficiency in defense due to the flow of funds. This is the reason that these shares look like very attractive investment right now.
Of course, the fact that these investments are on the board board, is a good sign and it gives a confidence about the company’s possibilities. But it is also sensible to remember that the best areas like defense can also face unexpected obstacles on the road. Things like change in government policies or overall status of the economy can have a big impact. Therefore, it is prudent to take care that the big players are investing their money, but it is even more intelligent to do their own homework.
Disclaimer:
Note: We have relied on the data of www.screner.in in this entire article. In cases where data was not available, we have used sources of alternative, but widely used and accepted information.
The purpose of this article is only to share interesting charts, data points and thought providing opinions. This is not a recommendation of any investment. If you want to consider investment, then you are advised to consult your advisor. This article is only for educational purposes.
Suhail Khan For more than a decade, there have been a passionate follower of the markets for more than a decade. During this period, he was an integral part in the form of Head of Sales and Marketing in a major equity research organization in Mumbai. Currently, they are spending most of their time to analyze the investment and strategies of India’s super investors.
Disclosure: The Writer and His Dependents do not hold the stocks discussed in this article.
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