The Defense Acquisition Council (DAC) in its winter session allocated around Rs. 790 billion has approved capital proposals, which is Rs. 3.3 trillion – which is Rs. Almost twice the annual defense capital expenditure of 1.8 trillion.
While these approvals represent an acknowledgment of need rather than an immediate order, an influx of orders of scale and variety will materially de-risk over the next two to four years.
The latest approvals cover munitions, missiles, air defense systems, surveillance and communication equipment, training systems, unmanned platforms and naval support assets. This reflects a balanced modernization push across the Army, Navy and Air Force rather than separate platform-based spending.
Importantly, the pipeline encompasses both high-value marquee programs and recurring electronics- and systems-led acquisitions, supporting stable execution and revenue visibility for defense manufacturers.
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The extension of the emergency procurement window extends near-term activity to mid-January 2026, enabling faster procurement of critical equipment and minimizing delays that may arise as earlier deadlines have passed.
A primary growth driver continues to be policy focus on operational readiness amid a fluid security environment with increasing reliance on indigenous platforms and systems.
Large-ticket missile and air defense programs, integrated electronic warfare systems, and unmanned and counter-unmanned solutions make up a significant portion of the approval pipeline.
However, execution timelines remain a major challenge, as AoN approvals must still navigate contracts, production ramp-ups and delivery schedules. The pace of conversion from budgetary allocations and approvals to firm orders will be a critical determinant of real growth in the coming years.
A significant structural trend is the increasing emphasis on integrated systems—combining sensor, communications, command-and-control, and motion elements—rather than single instruments.
Indigenous air defense architecture, advanced simulators and network-centric surveillance solutions highlight this transformation. In parallel, indigenous missile systems, air defense solutions and platforms are attracting interest from multiple geographies, attracting an export approach, offering growth that exceeds domestic demand over time.
With FY26 approvals already far exceeding annual capital expenditure, the sector will enter the next few years with its strongest procurement pipelines in recent memory.
Translating into emergency purchases, large missile and air defense programs and electronics-heavy systems contracts, defense manufacturing is positioned for continued order inflows, improved capacity utilization and strategic relevance in India’s broader industrial landscape.
Bharat Dynamics- TP: 2,000
BDL posted a strong 2QFY26 with 111% YoY revenue and 90% YoY EBITDA growth as supply-chain conditions improved, enabling faster execution. PAT grew 76% YoY, beating estimates and highlighting operating leverage recovery.
Across Akash, Astra Mk-1 and ATGMs cost Rs. 500 billion+ pipeline and a targeted incremental export contribution of 25% combined with Rs. 235 billion strong order book, offering strong multi-year execution visibility and diversified growth drivers.
We expect the company to post 35%/64%/51% revenue/EBITDA/PAT CAGR in FY25-28, driven by execution ramp-up, higher indigenization and operating leverage, RoE/RoCE to remain strong and increase to 25.2%/25.6% by FY28.
Astra Microwave Products – TP: 1,100
Astra Microwave Products (AMPL) designs and manufactures RF and microwave systems in India, transitioning from a subsystem supplier to a full-system solutions provider. The company targets opportunities in AESA and Uttam radar, meteorological projects, Navy repeat orders and counter-drone systems.
AMPL had an order book of INR 22b by September 2025 and delivered a revenue CAGR of 13% in FY21-25, with EBITDA margin increasing from 12.3% to 25.6%. We expect revenue CAGR of 18%, margins close to 26% and PAT CAGR of 23% in FY25-28.
We see AMPL as an attractive long-term opportunity in defense electronics, with revenue growth expected to accelerate during FY27-30 as large orders are placed by MoD and defense PSUs.
(The author is Head of Research – Wealth Management, Motilal Oswal Financial Services Ltd.)
(disclaimer: Recommendations, suggestions, opinions and views given by experts are their own. (These do not represent the views of The Economic Times)
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