Alpha | Garden Reach Shipbuilders & Engineers Ltd. – Equity Research Desk

Garden Reach Shipbuilders & Engineers Ltd – Premier Indian Shipbuilder

Established in 1934 and headquartered in Kolkata, Garden Reach Shipbuilders & Engineers Ltd. (GRSE) is one of India’s leading shipbuilding companies, operating under the administrative control of the Ministry of Defence. The company plays a vital role in bolstering the Indian Navy and Coast Guard by delivering a range of frontline warships, fast patrol vessels, landing crafts, and more. GRSE has the capacity to build up to 24 ships simultaneously. In addition to shipbuilding, the company has diversified into areas such as portable steel bridges, marine diesel engine overhauls and assembly, as well as the production of marine pumps and deck machinery.

Products and Services

The company’s diverse product portfolio ranges from complex naval warships to cutting-edge weapon systems, encompassing commercial vessels, advanced deck machinery, marine diesel engines, naval surface guns and, Bailey-type portable steel bridges.

Subsidiaries: As of FY25, the company does not have any subsidiary/associate company.

Investment Rationale

• Robust order pipeline – GRSE boasts a robust order book of Rs.21,700 crore as of June 30, 2025, comprising 10 projects across 40 marine platforms. The company has demonstrated strong execution capabilities, having delivered the first P-17A frigate ahead of schedule in July 2025, with the remaining two ships progressing well and expected to be delivered by April and August 2026, respectively. Several other key projects are underway, including Anti-Submarine Shallow WaterCrafts (7 ships), Survey Vessels (Large), Next-Generation Offshore Patrol Vessels, multipurpose vessels for a German client, and research vessels for DRDO and the Ministry of Earth Sciences. It has also secured a contract to build two coastal research vessels for the Geological Survey of India and has been declared L1 in the prestigious Next-Generation Corvette project. The company continues to support indigenization, having successfully completed trials of India’s first indigenous 30mm naval surface gun onboard a GRSE-built ship. In addition, the company is diversifying into inland and coastal transport with 13 hybrid ferries for the West Bengal government. Project execution remains on track, with several key deliveries expected through FY26 – FY29.

• Strategic expansion plans – The company is actively pursuing strategic expansion, with plans to establish a greenfield shipbuilding facility, in addition to acquiring a new dry dock from the Syama Prasad Mookerjee Port to strengthen its operational footprint within the city. The proposed greenfield facility, currently in the land finalization stage (approx. 30+ acres), is aimed at catering to both defence and non-defence sectors. In parallel, the company is making significant strides in advanced maritime technologies. GRSE has developed unmanned underwater and surface platforms, both of which have completed successful prototype trials and are now being refined based on feedback from DRDO and other stakeholders. These platforms are expected to cater to future demand from the Navy, Coast Guard, and research institutions. The company is also focusing on green vessels, having already delivered India’s largest and fastest 150-passenger hybrid ferry, now operating on the Hooghly River, and secured an order for 13 additional hybrid ferries. Furthermore, GRSE continues to expand its proprietary Bailey Bridge portfolio, supplying key infrastructure to the Indian Army, BRO, and NHIDCL. These efforts underline GRSE’s long-term vision to diversify its product base, enhance capacity, and drive innovation in next-generation maritime and defence technologies.

• Q1FY26 – The company reported a revenue of Rs.1,310 crore marking an increase of 30% compared to the Rs.1,010 crore revenue of Q1FY25. Operating profit stood at Rs.112 crore against the Rs.56 crore of Q1FY25, a surge by 100% YoY. The net profit stood at Rs.120 crore which is a growth of 38% as compared to the Rs.87 crores of same period in the previous year.

• FY25 – The company generated revenue of Rs.5,076 crore during FY25, an increase of 41% compared to the FY24 revenue. EBITDA was at Rs.422 crore, up by 80% YoY. The company reported net profit of Rs.527 crore, an increase of 48% YoY.

• Financial Performance – The company has generated revenue and net profit CAGR of 42% each over a period of 3 years (FY23-25). Average 3-year ROE & ROCE is around 23% and 28% for FY23-25 period. The company has strong balance sheet with zero debt in its capital structure.

Industry

India is one of the strongest military forces in the world and the industry holds a place of strategic importance for the Indian government. The country’s defence manufacturing industry is rapidly growing, driven by substantial government investments, increasing exports, and policies aimed at fostering self-reliance and technological innovation. As part of the ‘Aatmanirbhar Bharat’ (Self-Reliant India) initiative, the government has prioritized the Defence and Aerospace sectors, focusing on building domestic manufacturing capabilities supported by a strong research and development framework. To modernize its military and decrease dependence on foreign defence imports, the government has introduced several initiatives to promote ‘Make in India’ efforts through policy backing. Additionally, India has set an ambitious goal of achieving US$ 6.02 billion (Rs. 50,000 crore) in annual defence exports by 2028-29.

Growth Drivers

• In FY26, the Ministry of Defence (MoD) was allocated a total Budget of Rs. 6.81 lakh crore (US$ 78.7 billion), which is 9.5% YoY increase from FY25 budget.
• Growing demand for defence manufacturing given the rising concerns of national security.
• Provision for 100% Foreign Direct Investment (FDI) through Government route and 74% through Automatic route into the defence sector.

Peer Analysis

Competitors: Cochin Shipyard Ltd, Mazagon Dock Shipbuilders Ltd, etc.

Compared to its peers, GRSE has delivered stable returns on invested capital, supported by strong sales growth and a reasonable valuation.

Outlook

GRSE presents a strong investment case backed by a robust Rs.21,700 crore order book, consistent execution, and alignment with India’s defence indigenization drive. The company has a packed delivery schedule for FY26-FY29, including key projects like P-17A frigates, survey vessels, and anti-submarine crafts. To support future growth, GRSE plans to increase its shipbuilding capacity from 24 to 32 vessels by the end of 2026 through a greenfield shipyard and additional dry dock acquisitions. With stable returns on capital, growing export opportunities, and revenue visibility, GRSE remains well-positioned to deliver sustained growth in India’s expanding defence and maritime ecosystem.

Valuation

We believe GRSE provides a compelling investment opportunity given its role in the defence infrastructure of the country. We recommend a BUY rating in the stock with the target price (TP) of Rs.3,097, 40x FY27E EPS. We also encourage maintaining a stop-loss at 20% from the entry price to manage potential downside risk effectively.

SWOT Analysis

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