The seven new companies that have emerged from the former Ordnance Factory Board (OFB) have demonstrated a significant turnaround, with figures showing healthy after-tax profits, three years after a radical corporatisation process.
The companies, which previously suffered heavy losses, have now been directed to focus on research and development to meet the future demand of the armed forces as well as export orders from Defense Minister Rajnath Singh.
Official data from ET shows that the seven new companies are now posting a profit of ₹1,549 crore, with this number expected to grow by over 15% in the current financial year. This is a big change from the profit after tax of ₹35 crore posted in the financial year 2021-22.
The corporatization process was carried out in 2021, with Singh deeply involved in the restructuring, which was seen as a herculean task given the legacy issues and the strong unions present in the factories. However, the process has gone smoothly and the new factories have operated continuously for the past three years as order books swell due to growing global demand for defense equipment. Before the spin-off, the seven entities posted an average six-month loss of ₹1,775 crore, according to official data.
In the past, munitions factories were given shortlisted contracts and supplied the goods based on their production costs, rather than competitive prices. Under the new structure, the factories have to compete with private players and cut down on wasteful expenditure that in the past would have been passed on to the customer.
According to the data, the most impressive performance has been achieved by Yantra India Limited (YIL), which has been contracted to make additional equipment for the other factories. The Nagpur-based company has moved from a loss of ₹123 crore in 2021-22 to a profit after tax of ₹425 crore in the last financial year.
Chennai-based Armored Vehicles Nigam Limited (AVNL), which makes and maintains tanks and armored vehicles for the military, is the most profitable of the new public sector defense units, with a profit of ₹605 crore. Munitions India Limited (MIL), which makes ammunition for Indian armed forces as well as export orders, has posted a profit of ₹559 crore, up from ₹22 crore in 2021-22.
