Shares of Bharat Electronics (BEL) edged up on February 22 after the company announced it had signed an agreement with the Aeronautical Development Agency (ADA) and the Defence Research and Development Organisation (DRDO) for the Advanced Medium Combat Combat (AMCA) programme.

Shares of the defence company failed to sustain gains amid weakness in the broader market. Shares of the company were down 0.3% at Rs 95.30 on the BSE at 9:16 am.

The agreement outlines a collaboration between the two companies to design, develop and produce internal weapons bay computers and other LRUs for AMCA, providing lifetime product support for the Indian Air Force.

Sharekhan noted that its order backlog stood at Rs 50,116 crore, down 11% year-on-year and 5% quarter-on-quarter, indicating that order inflow in the third quarter was not very strong.

Despite orders falling back to a two-year low, BEL’s management remains confident about the company’s future prospects. During an analyst call discussing its FY23 Q3 results, the company announced that it expects the new facility to be completed in the next 2-3 years, which will help meet incoming defence order requirements.

BEL’s capex budget for FY23 and FY24 is Rs 600 crore and Rs 600-800 crore, respectively.

Nearly 75-80% of the current order of Rs 51,200 crore is based on nominations, of which around Rs 46,000 crore (80%) is from the defence sector. ICICI Securities pointed out that the increase in orders is the primary driver of stock performance, and they will monitor the company’s expected near-term orders.