Defence PSU Stocks Deliver Stellar Returns
Amid a significant rally in public sector undertaking (PSU) stocks, two Indian defence giants - Hindustan Aeronautics Ltd (HAL) and Bharat Electronics Ltd (BEL) - have generated exceptional wealth for their shareholders. Over the past five years, both defence PSUs have delivered astonishing returns exceeding 1,000% to their investors. However, their performance trajectories have diverged in 2025, with BEL shares surging by over 40% while HAL has remained an ideal sell-on-rise stock.
What's Fueling BEL's Impressive Rally?
According to Seema Srivastava, Senior Research Analyst at SMC Global Securities, BEL's remarkable performance stems from fundamental strengths. "BEL's long-term journey is shaping into a strong compounding story as the company evolves from a defence electronics supplier into a critical pillar of India's modern warfare systems", she explained.
The company's growth prospects appear robust with an order book of ₹75,600 crore and clear visibility of ₹27,000 crore in FY26 inflows, potentially reaching ₹57,000 crore when including QRSAM projects. BEL has entered a phase of structural growth rather than cyclical expansion, with management confident about delivering 15% revenue growth and sustaining EBITDA margins of 27% or more.
Multiple upcoming programs including QRSAM, LCA avionics, NGC radar orders, emergency procurements, and strategic roles in Project Kusha provide layered, multi-year growth triggers that will unfold sequentially beyond FY27.
Why BEL Outperformed HAL in 2025
Seema Srivastava highlighted the key differentiation between the two defence majors. "Compared to HAL, whose massive ₹2.5 trillion order book is tied to large and lumpy aircraft platforms, BEL benefits from shorter execution cycles and much broader product diversification across radars, electronic warfare, missile electronics, communication systems and command-control platforms".
As India deepens defence indigenization and shifts toward electronic-centric warfare, BEL's positioning becomes increasingly stronger. Sachin Jasuja, Head of Equities and Founding Partner at Centricity WealthTech, provided additional context on their fundamental differences.
"As of October 2025, BEL's order book is valued at approximately ₹74,000 crore, characterised by short-duration and recurring contracts. These typically involve missile systems, naval electronics, and electronic warfare products, allowing for faster execution timelines and more predictable revenue streams", Jasuja stated.
In contrast, HAL maintains a larger but longer-gestation order book of nearly ₹1.89 trillion as of FY25. HAL's projects are capital-intensive and involve significant reliance on imported engines like the GE F414, despite ongoing indigenization efforts.
Investment Outlook: BEL vs HAL
Management commentary from BEL's recent Q2 FY26 earnings underscores shorter project cycles that enable quicker order turnarounds, improved revenue visibility, and consistent margin delivery. BEL is actively pursuing export markets and increasing indigenization, which should support strong order inflows and broaden growth opportunities.
Meanwhile, HAL's aerospace programs, while essential and large-scale, naturally involve longer development periods and require heavier capital investments. Both companies heavily depend on government orders, policy continuity, and defence budget allocations, representing systemic risks.
However, BEL's lighter asset base and higher revenue velocity structurally position it for faster growth. Although BEL currently commands a valuation premium, its strong R&D pipeline, expanding product portfolio, and operational leverage justify this premium significantly.
Seema Srivastava expects the trend to continue, stating "HAL will remain a scale giant, but BEL offers a more scalable and predictable compounding runway. With margin stability, expanding exports, rising R&D strength and a widening role in India's strategic programmes, BEL share price has the potential to outperform HAL shares on percentage returns and emerge as a long-term multibagger in the defence space".
On whether BEL represents the next HAL on steroids, Sachin Jasuja offered a measured perspective. "It may be somewhat exaggerated to label BEL as the 'next HAL on steroids,' given that both companies operate in distinct yet complementary niches within the Indian defence ecosystem. BEL already commands a ₹3 lakh crore market cap with slightly rich valuations and a larger base".
Nevertheless, BEL's effective execution, short-cycle order book, and strategic focus on technology-intensive defence electronics continue to make it attractive as a potential growth candidate, especially as export ambitions gain traction amid changing geopolitical dynamics driving increased defence spending globally.
