Indian Defence ministry puts on hold all defence contracts with ST Engineering and 6 other suppliers

1. US$1 billion dollar to supply Howitzers for the Indian Army put on Hold - The Sunday Times, reported yesterday that ST Engineering (STE) along with 6 other supplies were short-listed to supply howitzers in a deal worth US$1 billion. This has been put on hold as the Indian Defense Ministry investigates alleged corruption. STE is not directly implicated and the company was reported as saying that it had not contravened regulations imposed by governments.

2. ST Kinetics was reportedly a front runner and competing with Israeli and US defense industries.- The fact that ST Kinetic( STE's land system division) was short-listed and reportedly a front runner to secure the contract, which was contested by first tier defense contractors is a major vote of confidence in the ST Kinetics capability. "Pegasus" howitzer as it is called , is lightweight and has the capability to fire 3 round in 24 seconds.

3. No Impact on stock price but watch out for announcements - ST Engineering had not announced that it was in negotiations to supply the Howitzer and thus the expectations of such a contract is not in the price. We are neutral on this news. We have a Sell recommendation on the stock with a $2.14 price target.