Avantel surges 18 per cent intraday on receiving new defence order

The shares of telecommunication device maker Avantel Ltd jumped as much as 19 per cent intraday on Friday.

The key reason for such a sharp gain in the stock is the new order from the Ministry of Defence.

Avantel, a small-sized telecom equipment manufacturer, informed on Friday that it has signed a contract worth Rs 96.76 crore with IHQ, MoD (Indian Navy), for the supply of communication equipment for Indian Naval ships. Looking at its annual revenue of Rs 52 crore for FY20, this order is of quite a significance to the company.

Being largely dependent on tenders, this defence order is expected to remain in the watch list of the investors due to government initiatives such as Atmanirbhar Bharat etc.

In the Budget presented in February 2020, the total allocation for defence has increased from Rs 4,31,011 crore to Rs 4,71,378 crore, a growth of 9.37 per cent. Though the sector was expecting it to be further incremental, cues after the recent lockdown and China standoff are looking better for the company.

It is to be noted that due to the current COVID-19 pandemic, business operations of the company was severely hampered. It also resulted in delayed order placements, long manufacturing, owing to delayed raw material procurement, etc.

At 2.00 pm, the stock was trading at Rs 449 per share on BSE.