While these approvals represent an acceptance of necessity rather than immediate orders, the size and diversity significantly reduce the risk of order inflows to the industry over the next two to four years.The latest approvals cover ammunition, missiles, air defense systems, surveillance and communications equipment, training systems, unmanned platforms and naval support assets. This reflects balanced modernization across the Army, Navy and Air Force, rather than isolated, platform-driven spending.
Importantly, the pipeline includes both high-value selection programs and recurring electronics and systems-driven purchasing, supporting more stable execution and revenue visibility for defense manufacturers.
The extension of the emergency procurement deadline to mid-January 2026 further supports near-term operations, enabling rapid purchases of critical equipment and mitigating delays that could have occurred as previous deadlines passed.
The key growth driver remains the continued policy focus on operational preparedness in a volatile security environment, coupled with an increasing reliance on indigenous platforms and systems. Major missile and air defense programs, integrated electronic warfare systems, and unmanned and counter-unmanned solutions comprise a substantial portion of the approval pipeline.
However, implementation timelines remain a key challenge as AoN approvals still need to deal with contracts, production ramp-ups and delivery schedules. Budgetary allocations in the coming years and the pace of transition from approvals to final orders will be crucial determinants of the growth achieved.
A notable structural trend is the growing emphasis on integrated systems – a combination of sensors, communications, command and control and kinetic elements – rather than standalone equipment.
Indigenous air defense architectures, advanced simulators and network-centric surveillance solutions are highlighting this shift. At the same time, the export orientation is gaining momentum, with indigenous missile systems, air defense solutions and platforms attracting interest from multiple regions, creating incremental growth over time beyond domestic demand.
With FY26 approvals already far exceeding annual capital expenditures, the sector is entering one of the strongest procurement pipelines in recent history in the coming years.
As emergency procurement, major missile and air defense programs and electronics-heavy systems translate into contracts, defense manufacturing is positioned for sustained order inflows, improved capacity utilization and greater strategic relevance within India’s broader industrial landscape.
Bharat Dynamics-TP: 2,000
BDL posted a strong Q2 26 with revenue up 111% year-on-year and EBITDA growth of 90% year-on-year as supply chain conditions improved, enabling faster execution. PAT rose 76% year-over-year, exceeding expectations and highlighting the recovery of operational debt.
A robust order book of Rs 235 billion for Akash, Astra Mk-1 and ATGMs, combined with a pipeline of Rs 500 billion+ and incremental export contribution targeted at 25%, provides strong multi-year execution visibility and diversified growth engines.
We expect the company to deliver a revenue/EBITDA/PAT CAGR of 35%/64%/51% in FY25-28, driven by ramping up execution activities, higher indigenization and operating leverage, with RoE/RoCE remaining strong and rising to 25.2%/25.6% in FY28.
Astra Microwave Products – TP: 1,100
Astra Microwave Products (AMPL) designs and manufactures RF and microwave systems in India and is evolving from a subsystem supplier to a complete system solutions supplier. The company is focusing on capabilities in AESA and Uttam radars, meteorological projects, Navy repeat orders and counter-drone systems.
AMPL had an order book of INR 22 billion as of September 2025 and achieved a revenue CAGR of 13% in FY21-25, with EBITDA margins increasing from 12.3% to 25.6%. We expect a revenue CAGR of 18% in FY25-28, margins close to 26% and a PAT CAGR of 23%.
We view AMPL as an attractive long-term opportunity in defense electronics, with revenue growth expected to accelerate in FY27-30 as larger orders are awarded by the MoD and defense PSUs.
(The author is Head of Research – Wealth Management, Motilal Oswal Financial Services Ltd)
(Disclaimer: Recommendations, suggestions, views and opinions expressed by experts are their own. These do not represent the views of the Economic Times)
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