Bharat Electronics Limited (BEL), one of India's prominent Navratna public sector undertakings, is set to convene its board on March 5, 2025, to discuss the possibility of declaring an interim dividend for its shareholders. This anticipated meeting has drawn attention not only due to its potential financial impact but also because it hints at changes for investors who have been closely monitoring the company's stock performance.
Historically, BEL’s dividend payouts have been modest, with the last significant distribution dating back to February 2017, when the company issued a dividend of Rs 3 per share. Since then, BEL has primarily issued dividends below Rs 1 per share, raising expectations for what might be announced this time around. If the board declares an interim dividend greater than Rs 3 per share, it would mark the largest payout from the company since 2017, highlighting its strengthened financial position after reporting impressive results.
For the third quarter of this fiscal year, BEL reported revenues of Rs 5,643.25 crore, which marks a remarkable 36.97% increase from Rs 4,120.10 crore during the same period last year. Its net profit surged by 47.3%, landing at Rs 1,316 crore for the quarter, alongside a substantial EBITDA increase of 57.5% to Rs 1,653 crore, achieving an EBITDA margin of 28.7%—a significant improvement from the previous year’s 25.4% margin.
But the backdrop isn’t entirely rosy; BEL’s share performance has faced volatility. On the National Stock Exchange (NSE), BEL shares closed at Rs 256, reflecting only a slight increase of 0.12% from the prior session. This performance, unfortunately, marks over a 12% drop since the start of the year, and the shares have plummeted approximately 25% from their peak of Rs 340 earlier.
Across the defence sector, BEL shares, along with those of Hindustan Aeronautics Limited (HAL), have undergone corrections up to 40% from their record highs, signaling difficulties but also potential buying opportunities, according to analysts. A recent report from brokerage firm JPMorgan emphasized this correction, calling it favorable for valuations. The firm asserted, "Recent correction ... makes them more appealing from a valuation standpoint," providing optimism for future performance within the sector.
Analysts concur, with 24 out of 27 maintaining buy ratings on BEL shares. With the expected growth of India's defence budget and the indigenization drive, many see BEL’s position strengthened by current geopolitical dynamics. JPMorgan noted, "Expanding defence ties with the US will be ... for India's domestic industry," indicating continued positive sentiment around defence stocks.
Despite this market correction, the operational strength of BEL remains evident. The company has managed to maintain significant business momentum, with its order backlog reaching Rs 71,100 crore. This substantial backlog assures investors of BEL's sustained revenue flow, with burgeoning deals and contracts with the Ministry of Defence noted, including the recent signing of a contract valued at Rs 1,034 crore for providing Software Defined Radios and Data Communication Terminals for the Indian Coast Guard.
Although recent months have seen unattractive price performance, analyst forecasts remain positive, particularly after events like Aero India 2025, which are expected to lead to increased government investment and changes to defence budgets. Niche opportunities for growth could transform BEL’s outlook significantly, intensifying investor interest as the board meeting date approaches.
With the upcoming announcement of the interim dividend, shareholders are watching closely, as this could signal both financial health and the management's approach to rewarding investors amid fluctuated stock performance.
Overall, as BEL continues to navigate this complex market with its strong order book and promising financial indicators, it becomes pivotal for current and prospective investors to watch the developments closely. Analyst sentiments suggest resilience and opportunity, especially if the board meeting yields favorable decisions on dividend distributions, potentially revitalizing investor confidence.