- By Swarnima Sapre
War represents a solemn and sorrowful occurrence that leads to immeasurable anguish and destruction. Regrettably, it is an undeniable fact that certain enterprises have identified avenues for financial gain amidst the disorder and turmoil inherent in such situations. While contemplating this reality might evoke a sense of dismay, there have been situations where businesses have prospered amid times of conflict, leveraging distinct circumstances to achieve economic benefits. This article explores the intricate and ethically complex subject of companies attaining profits during war, offering insights into the sectors and elements that play a role in their achievements.
Financial markets, in particular, harbor a strong aversion to war and respond with significant volatility, as normal business operations undergo substantial disruption. The concerns materialized as the supply of numerous commodities like oil and gasoline, grains, energy, metals, etc. encountered disruptions, leading to escalated prices. Consequently, various companies could grapple with the adverse effects of inflated input costs. Nonetheless, certain entities are poised to reap benefits from the upsurge in prices.
The Russia-Ukraine war threw opportunities for 2 sectors/industries:
DEFENSE INDUSTRY
Arms dealers and military contractors often experience increased demand for their products and services during times of conflict. From the production of weapons and ammunition to the development of advanced military technology, these companies see substantial revenue growth. A few companies whose prices surged during the times of conflict are:
Bharat Dynamics: The stock was trading at 464.78 and the current market price(CMP) is 1159.26, which is a 694.48 points increase, a nearly 149% increase.
Reason: Bharat Dynamics has been a beneficiary of the government’s focus on the defence sector to make India self-reliant and a defence manufacturing hub which is luring investors towards companies in space. Make in India, Production linked incentive was another reason which generated handsome returns for the investors.
Hindustan Aeronautical Limited: The stock was trading at 1408.74 and the current market price(CMP) is 3880, which is a 2471.26 points increase, nearly 175% increase.
Reason: Russia import substitution had proposed to manufacture its Sukhoi Superjet civil aircraft in India and the United Aircraft Corporation (UAC) was in talks with Hindustan Aeronautics Limited (HAL). Allegedly, the company has entered into a Memorandum of Understanding (MoU) with the French aerospace engine company Safran. This agreement aims to expand collaboration and investigate potential avenues for developing novel helicopter engines for both civilian and military applications. Also, HAL is set to take on the primary role, while L&T will partake in the efforts concerning 5 Polar Space Launch Vehicles(PSLVs).
PHARMACEUTICAL SECTOR
During the war, there is often an increased demand for medical supplies, including pharmaceutical products such as antibiotics, pain relievers, wound dressings, and other essential medications. This increased demand can lead to higher sales and profits for pharmaceutical companies that produce these products. Increased demand for medical products, government contracts, and potential for higher profits can impact investors' perceptions and stock prices.
Pharmaceutical goods stand as a primary export category from India to Ukraine, with India ranking as the third most significant pharmaceutical exporter to Ukraine, trailing behind Germany and France. Notably, prominent Indian pharmaceutical companies such as Dr Reddy's Laboratories and Sun Pharma have established substantial footholds in both Ukraine and Russia.
Sunpharma: The stock was trading at 870 during Feb’22, followed by a downfall in the price due to the war, and again bouncing back with the current market price(CMP) as 1163, which is a 273 points increase, nearly 30% increase.
Reason: Sun pharma has obtained final endorsement from the US health regulatory authority for Mesalamine extended-release capsules, which are employed in the treatment of bowel diseases, for the American market. Also, it is poised to introduce a medication that reduces bad cholesterol levels for individuals who continue to have elevated LDL levels despite making lifestyle adjustments and undergoing statin therapy
Dr. Reddy’s: The stock was trading at 3694 and the current market price(CMP) is 5894, which is a 2200 points increase, nearly 59.5% increase.
Reason: The company has released its generic iteration of extended-release fesoterodine fumarate tablets, which are utilized to address overactive bladder issues, within the US market. These generics serve as the therapeutic counterparts to Toviaz. Also, Life Insurance Corporation of India has increased its stake to 7.7% in the pharmaceutical firm through the purchase of 33.86 lakh shares
In the end, the relationship between war and the stock market is a multi-faceted topic that requires a comprehensive understanding of economic, ethical, and social factors. While some companies may indeed experience short-term gains during times of conflict, the long-term sustainability of these gains is a matter of careful consideration. As investors, policymakers, and citizens, it is essential to promote responsible investing practices and encourage companies to contribute positively to the global community, irrespective of the prevailing geopolitical climate.
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