Pipavav frozen on 5% upper circuit

Pipavav Defence is up amongst the top gainers of the day currently, up 5% at Rs.67.60, frozen at the upper circuit. The stock has been hitting the upper circuit consistently for the past few days. Its 52-week high is at Rs.71.50.

The stock hit the roof on reports that the Commerce Ministry has approved the Department of Industrial Policy & Promotion (DIPP) draft, allowing up to 100% FDI in defence. Currently, only 26% FDI is allowed in defence though the Govt can clear on case-to-case basis for more.

The DIPP has proposed three slabs – 49% FDI where there is no technology transfer, 74% where there is technology transfer and 100% where it will bring in new state-of-the art technology.

This is a move in the right direction, given the fact that India imports major part of its defence needs and if we can manufacture it domestically, it will not only ease the import burden, making us independent but will also give an impetus to the manufacturing sector and create employment.

Naturally stocks like Pipavav, BEL, L&T, BHEL and BEML stand to gain as they are amongst the handful of companies which manufacture defence equipments.

Pipavav is to declare its Q4/FY14 numbers today.