2 defence smallcaps with up to 81% ROCE. Mukul Agrawal just bought into one
Mukul Agrawal has taken a fresh stake in a Bengaluru defence parts maker. In the same city, a small, newly listed machine shop recently secured two orders from Hindustan Aeronautics and earns 81% on its capital. One looks cheap next to the sector. The other looks clean on cash. Both have run hard since their IPOs, and both are now well off their highs.
Underdogs Quietly Causing Ripples Most retail money in defence stocks goes to the household names, the aircraft builders, radar makers and shipyards. Seasoned stock pickers often look one layer down. That is where small workshops make valves, sensor housings and engine parts for those giants, and for foreign plane makers meeting offset duties in India. Two such workshops listed on the small and medium enterprise (SME) platforms this year.
The first debuted on NSE Emerge in March at an issue price of Rs 110. The second followed on BSE SME in July at Rs 331. As on 30th October 2026, they trade at Rs 505 and Rs 961. Mukul Agrawal, one of the market's busiest smallcap hunters, has just taken a fresh 1.21% stake in the first. On a stock screener, the two look like twins: ROCE above 30%, borrowings that are tiny next to net worth, and profits that have multiplied in three years.
Up close, they part ways. One is priced above the sector and collects its cash quickly. The other is priced below it and is still waiting to be paid. FE Stock Insights on WhatsApPGet instant alerts on high-conviction investment themes and fundamental deep dives—direct from Financial Express.Join now #1 Apsis Aerocom: Mukul Agrawal's New Defence Stock With 32% ROCE and Almost No Debt Incorporated in 2022, Apsis Aerocom machines precision parts for defence, aerospace and healthcare customers from the Peenya industrial area in Bengaluru.
It makes low-volume, high-value parts where a reject is not an option. In FY26, defence made up about 65% of its revenue, aerospace about 26% and healthcare about 8%, according to the company's earnings call transcript filed with NSE. Most of these orders come from foreign defence companies through their offset units in India. Management says close to 40% of revenue comes from parts where Apsis is the only approved supplier.
Per the exchange filings for the quarter ending September 2026, Mukul Agrawal held around 1,46,400 shares, a stake of 1.21%. At the close on 30th October 2026, that holding is worth about Rs 7.4 cr. When the stake surfaced on 12th October, the stock hit its upper circuit at Rs 626.70. It has since slipped about 19%. Apsis Aerocom Financials: A 94% Profit CAGR in Three Years With only four years of audited numbers, Apsis has no five-year record, so the table uses three.
Financial YearFY23FY24FY25FY263Y CAGRSales (Rs cr)10.3716.8720.4930.6544%EBITDA (Rs cr)1.924.1710.2011.5082%Net Profit (Rs cr)1.032.556.607.5194%Source: Screener.in EBITDA here refers to operating profit before other income. Five-year CAGR is not available as the company was incorporated in 2022. The second half of FY26 was the strongest stretch yet. Sales rose 78% to Rs 16.99 cr from a year earlier, and net profit rose 42% to Rs 4.24 cr.
Why Apsis Margins Fell From 50% to 37% Profit grew slower than sales in FY26 as operating margin dropped from about 50% to 37.5%. On the June 2026 earnings call, management pointed to three pressures. A second plant was adding costs before earning revenue, listing brought new expenses, and raw material got dearer. It says it can hold margins at 37% to 40%. The second plant, at the Hitech Aerospace and Defence Park in Devanahalli, was inaugurated in August 2026.
It is about twice the size of the first, which is already running full. Management has guided for FY27 revenue of about Rs 48 cr. The open order book stood at about Rs 40.5 cr, of which Rs 25 cr is defence. Borrowings stood at just Rs 4.50 cr in March 2026 against a net worth of about Rs 49 cr, a debt-to-equity ratio of 0.09. Thanks largely to the IPO, net cash flow for FY26 came in at Rs 34 cr. ROCE for FY26 was 32%, down from 96% a year earlier, mainly because the fresh IPO cash has not yet been put to work.
Apsis Aerocom Share Price and PE: 81x Against a Sector at 72x The share price of Apsis Aerocom opened at Rs 153 on its listing day, 18th March 2026, against an issue price of Rs 110. As of closing on 30th October 2026, it was Rs 505, about 360% above the issue price but 22% below its 52-week high of Rs 645. The stock trades at a PE of about 81x and nearly 20 times its FY26 sales. The current industry median PE for aerospace and defence is 72x.
There is no 10-year median PE to compare against the industry's, since Apsis has been listed for just over seven months. For context, Hindustan Aeronautics (HAL) trades at about 35x. Two risks stand out. The top five customers still bring in 87% of revenue, even after the largest one fell from 52% to 35%. And at 81 times earnings, the price already assumes the new plant fills up on schedule. #2 Millworks Technologies: The HAL supplier with 81% ROCE, priced below the defence sector Incorporated in November 2021, Millworks Technologies runs four plants in Bengaluru.
It makes machined parts, sheet metal parts and complete assemblies for defence, railways, aerospace and semiconductor equipment makers. Its founders, Sridhar Acharya and H K Madhu, started with five old machines. The last few weeks have been busy. In a filing with BSE on 21st October 2026, the company said it had won two development orders from HAL. One is for oxygen valve assemblies on the Hawk jet trainer.
The other is for surge warning sensor assemblies on the RD-33 engine that powers the MiG-29. No order values were given. The same filing announced a tie-up with Chennai-based TridenTech Engineering to build an engine for drones. Two days earlier, it announced a 3D printing centre with Markforged. In August, its board also cleared a 67% stake in Vidwan Aeronautics, an aero-engine parts maker, by converting a loan of about Rs 2.75 cr into equity.
Millworks Financials: Sales Jumped from Rs 22 cr to Rs 149 cr in One Year Revenue grew almost seven times in FY26, and profit kept pace. Financial YearFY23FY24FY25FY263Y CAGRSales (Rs cr)2922149320%EBITDA (Rs cr)03852NMNet Profit (Rs cr)02537NM%Source: Screener.in EBITDA here refers to operating profit before other income. NM: not meaningful, as the FY23 base is below Rs 1 cr. Five-year CAGR is not available as the company was incorporated in November 2021.
Read those CAGRs with care, since they start from a tiny base. More telling, operating margin has held at about 35% for two years, return on equity was 70% in FY26 and ROCE was 81%. As per its offer document filed with BSE, defence rose from under 7% of revenue in FY25 to about 49% in the first eight months of FY26. The 340-Day Catch: Why Millworks is Bleeding Operating Cash Millworks reported a net profit of Rs 37 cr in FY26, yet cash from operations was negative Rs 11 cr.
It has been negative in three of the last four years. Debtor days rose to 340 in FY26, which means customers were taking almost a year to pay. Money owed to suppliers was stretched to 349 days to fill the gap. The IPO in July raised Rs 160 cr, and Rs 81.50 cr of it was set aside for working capital. Borrowings were Rs 17 cr in March 2026, a debt-to-equity ratio of 0.21, and that was before the IPO cash arrived.
The company is not debt-free, but its debt is light. 90 on its listing day, 21st July 2026, a 90% premium to its issue price of Rs 331. As of closing on 30th October 2026, it was Rs 961, about 190% above the issue price but 26% below its 52-week high of Rs 1,306. At a market cap of about Rs 1,692 cr, the stock trades at a PE of about 46x. That is below the industry median of 72x, though above HAL's 35x.
As with Apsis, there is no 10-year PE history to lean on, since the stock has traded for barely three months. Promoters hold 47.18% after the IPO. The offer document flagged that the top ten customers made up more than 90% of revenue in every year reported, along with some past filing lapses. For a business this concentrated, one late payment can swing a whole year's cash flow. Regulatory Blindspots in SME Listings Both are SME listings, and that changes how you own them.
Shares trade in fixed lots. At the IPO, retail investors needed about Rs 2.64 lakh for the smallest bid in either issue. Volumes are thin. On 30th October, about 12,000 Apsis shares changed hands on NSE and 19,600 Millworks shares on BSE. Results come every six months, so the September 2026 numbers will only arrive by mid-November. Several governance rules that bind main-board companies do not apply, and Apsis told NSE in October that its governance report is not applicable.
Lock-ins on promoter and pre-IPO shares will also lapse in stages, each one adding possible sellers to a thin market. Price or Plumbing: Which Defence Stock Has the Stronger Case? Side by side, the trade-off is plain. Apsis has the cleaner plumbing. Its customers pay in about 48 days, it turned most of its FY26 operating profit into cash, and it has a new plant to fill. But the market is charging 81 times earnings for that comfort.
Millworks has the better headline returns and the lower multiple. Yet its customers took almost a year to pay, and its growth has so far eaten more cash than it has thrown off. The discount to the sector is there for a reason. Agrawal's disclosed bet is on the one with the cleaner cash flow, not the cheaper multiple. That may say more about how he reads small companies than any single ratio. Both stocks have cooled from their peaks, and the November results will be their first real test since listing.
A sensible step would be to add these stocks to a watchlist and see whether the cash follows the profits. Disclaimer: Note: We have relied on data from www.Screener.in and www.trendlyne.com throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information, including filings made available on the BSE website. The purpose of this article is only to share interesting charts, data points and thought-provoking opinions.
It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only. Suhel Khan has been a passionate follower of the markets for over a decade. During this period, He was an integral part of a leading Equity Research organisation based in Mumbai as the Head of Sales & Marketing. Presently, he is spending most of his time dissecting the investments and strategies of the Super Investors of India.
Disclosure: The writer and his dependents do not hold the stocks discussed in this article. The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers
