Stroke mine, Research Analyst, PL Capital in an interview with ET Nownoted that the government actively promotes the participation of SMEs and supports startups through programs such as iDEX. “At least Rs 3,000 crore has been allocated to smaller platforms. Structural changes are being made to localize defense production. Domestic procurement has increased from 71,000 to nearly 1,20,000 in three years, showing strong growth and indicating a CAGR of 16-17% in the industry,” he said.
Public sector defense companies have also seen significant revaluation. Order books for companies like Bharat Electronics (BEL) have doubled or tripled in the last three to four years, thanks to platforms moving from development to production phases and faster project execution. BEL’s order intake is expected to exceed one crore this year, supporting 14-15% growth over the next three to four years.
Risks remain in the supply chain, especially for companies like HAL that rely on imported engines. Efforts are underway to locate components and pursue technology transfer for critical systems. This focus on localization and robust order books ensures a steady growth trajectory, with HAL expected to maintain a CAGR of 13-14% over the next five to seven years.
Anwani highlighted defense electronics as a key growth area. “Companies like Astra Microwave and Apollo Micro Systems have grown at 30-40% CAGR, doubling PAT and improving margins significantly. Small private companies could be big beneficiaries in the next two to three years, supported by MSME and R&D initiatives like iDEX,” he said.
With policy reforms, increased localization and government-backed incentives, India’s defense sector is poised for a new era of innovation, robust growth and stronger participation from startups and SMEs.
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