Rights entitlement of Avantel surges as defence orders drive strategic investor optimism

The rights entitlement of Avantel Limited (AVANTEL-RE) surged to ₹79 on May 17, 2025, reflecting strong investor interest in the company’s ongoing rights issue and underlining broader optimism around its growing role in India‘s defence communication ecosystem. Trading volumes climbed to 4.85 lakh shares, generating a turnover exceeding ₹3.45 crore on the Bombay Stock Exchange. The market response signalled robust secondary market interest in the entitlements even as the parent company pursues an ₹80.90 crore fundraise through a rights issue priced significantly lower at ₹40 per share.

Why Is Avantel’s Rights Entitlement Trading at a Premium?

The steep premium in the AVANTEL-RE instrument over its issue price demonstrates investor confidence in Avantel Limited’s long-term trajectory. Under the terms of the rights issue, eligible shareholders are entitled to receive 10 rights shares for every 121 equity shares held as of the record date, which was set for May 7, 2025. The subscription window opened on May 15 and will close on May 22, 2025, allowing investors to subscribe at a substantial discount to market price.

This market enthusiasm stems from the company’s deepening presence in the defence sector, particularly in satellite-based communication systems used by Indian defence forces. The differential between the ₹79 entitlement price and the ₹40 subscription price creates an arbitrage opportunity for those expecting Avantel shares to trade higher once the newly issued equity is listed, reinforcing demand for AVANTEL-RE on exchanges.

What Is Driving Investor Confidence in Avantel’s Defence Business?

Avantel’s strategic focus on high-reliability satellite communication solutions for military and paramilitary applications has placed it in a favourable position amid India’s rising defence capital expenditure. The company has built a niche offering in satellite ground terminals, software-defined radios, data modems, and telemetry systems, many of which are integrated into critical naval and aerospace platforms.

Investor sentiment has been particularly buoyed by Avantel’s recent contracts with the Indian Navy. Notably, it secured a ₹8.61 crore Comprehensive Annual Maintenance Contract (CAMC) from Naval Headquarters for the upkeep of satellite communication systems, with execution scheduled through January 2028. This was followed by a ₹5.3 crore supply order from the Navy for key communications equipment, signalling consistent traction in defence procurement pipelines.

Such government-linked contracts not only provide revenue visibility over multi-year horizons but also signal regulatory and operational trust in Avantel’s technical capabilities—an intangible yet powerful investor magnet in the Indian stock market’s defence and aerospace segment.

How Has Avantel’s Financial Performance Strengthened Its Market Standing?

Avantel has consistently delivered growth in revenue and profitability, reinforcing market belief in its fundamentals. For the financial year ending March 31, 2025, the company reported revenues of ₹250.25 crore, marking an increase from ₹225.22 crore in the previous fiscal year. Net profit rose to ₹59.57 crore, supported by a stable EBITDA margin and operational efficiencies.

The company’s return on equity and debt-free balance sheet have further improved its appeal to institutional investors and retail shareholders alike. With the proceeds from the ongoing rights issue earmarked for capacity expansion and R&D, Avantel is expected to strengthen its competitive edge in high-barrier defence segments.

Moreover, the Make in India and Atmanirbhar Bharat initiatives have catalyzed domestic defence manufacturing, giving mid-sized players like Avantel the policy tailwinds to scale more rapidly than before. Its inclusion in several defence offset programs and public sector partnerships, including with Bharat Electronics and Hindustan Aeronautics, underscores this favourable policy positioning.

What Does the Rights Issue Mean for Avantel’s Capital Structure?

The ₹80.90 crore rights issue comprises 2.02 crore equity shares at ₹40 each, offering existing shareholders a chance to participate in the company’s growth journey at a compelling valuation. If fully subscribed, the issue will significantly enhance Avantel’s liquidity position without burdening it with debt, allowing the company to pursue expansion opportunities, strengthen its R&D capabilities, and diversify its product portfolio for international markets.

The capital raise also comes at a strategic juncture as Avantel seeks to expand its footprint in global defence communications through exports and technology alliances. The post-issue equity base expansion is likely to be well-absorbed given the strong institutional and strategic interest in defence-linked counters.

Market analysts expect the rights issue to be fully subscribed given the deep discount, strong fundamentals, and bullish sentiment surrounding India’s defence modernisation. The premium on AVANTEL-RE trading is being interpreted as a leading indicator of eventual price recovery in the fully paid-up stock post-allotment.

How Does Avantel Compare With Peers in India’s Defence Tech Sector?

Avantel operates in a highly specialised segment of the defence value chain, offering mission-critical communication systems where switching costs are high and client retention is long-term by design. Its major peers include Astra Microwave Products, Data Patterns, Paras Defence and Space Technologies, and Centum Electronics—all of which have benefitted from rising defence allocations and indigenisation mandates.

While companies like Data Patterns and Paras Defence operate in both design and production of aerospace and satellite components, Avantel has carved a distinct identity around software-intensive, signal processing-based communications, including SATCOM, telemetry, and ISR (intelligence, surveillance, reconnaissance) components. The combination of recurring maintenance contracts and fresh defence orders provides it a revenue model with both annuity and expansionary streams.

Among the listed defence stocks, Avantel’s relatively modest market capitalization (₹4,200 crore as of mid-May 2025) and attractive P/E ratio (trailing at approximately 20x FY25 earnings) offer scope for re-rating if the defence communication segment expands as expected under India’s defence budget and strategic imperatives.

What Are Analysts and Institutional Investors Saying About Avantel?

Market participants have lauded Avantel’s ability to convert technical strengths into long-term contracts, especially from high-credit clients like the Ministry of Defence. Brokerage analysts covering the mid-cap defence sector have projected earnings growth in the range of 15–20% CAGR over the next three years, driven by order book expansion and operational leverage from increased capacity utilisation.

Foreign portfolio investors (FPIs) have shown incremental interest in the counter since early 2024, when the company announced plans to expand into aerospace telemetry and ground station systems with export potential. Mutual funds and domestic institutional investors (DIIs), meanwhile, are said to be awaiting the outcome of the rights issue to assess further entry points.

The institutional sentiment is further supported by the company’s zero net-debt position and consistent dividend payout history, which signal conservative financial management amid growth ambition—an attractive combination for long-term portfolio investors.

Could Avantel’s Growth Trajectory Extend Beyond India’s Defence Sector?

While Avantel’s current success is deeply tied to India’s defence procurement ecosystem, it has also been exploring applications of its communication systems in civilian sectors such as satellite-based disaster response, railways, and remote connectivity solutions. Additionally, the company is investigating dual-use adaptations for its telemetry and SATCOM technologies in commercial satellite communication and logistics monitoring systems.

Industry experts believe this dual-path approach—focusing on core defence growth while exploring adjacent civilian markets—could provide revenue stability and tech platform leverage over the longer term. With the Indian government also focusing on private participation in the space sector, Avantel may find new growth vectors in the coming years, supported by its proven hardware-software integration capabilities.

What’s Next for Avantel Shareholders and Rights Entitlement Holders?

With the rights issue window set to close on May 22, 2025, shareholders have a short window to participate in the discounted equity offering. Those trading in AVANTEL-RE will need to ensure they exercise their entitlements on time or sell them before expiry, given the potential dilution of holding if ignored.

Post-allotment, analysts expect heightened liquidity in the counter, with possible re-rating based on both the capital infusion and fresh defence announcements in the coming quarters. As the rights shares get listed, the arbitrage gap between AVANTEL-RE and the main stock is expected to normalize, but the broader institutional focus on defence-linked midcaps is likely to remain elevated.

With rising geopolitical tensions, government focus on indigenised defence procurement, and proven delivery from niche players, Avantel is poised to benefit from both capital markets interest and procurement tailwinds over the medium term.