Indian Defence Sector Poised for Robust Growth Amidst Rising Localisation Initiatives
The Indian defence sector anticipates significant growth in FY2026, with a projected revenue increase of 15-17%, driven by strong order execution and domestic procurement initiatives led by the Atmanirbhar Bharat mission. However, private players face challenges in working capital management despite profitability gains.
- Country:
- India
The Indian defence sector is set to experience substantial growth, with revenues expected to rise by 15-17% by FY2026. This expansion, as reported by the Investment Information and Credit Rating Agency (ICRA), is attributed to strong execution and a robust order book, maintaining an order book/operating income ratio of 4.4 times by the end of FY2025.
ICRA's analysis suggests that various defence production entities—including land, naval, aeronautical, and armament sectors—will benefit from increased budgetary allocations since 2015. This lead to healthy order inflows as government emphasizes local procurement. Vice President Suprio Banerjee of ICRA highlights significant operating margins of 25-27% supported by economies of scale and rising localisation efforts.
India's initiatives, such as Atmanirbhar Bharat, have bolstered domestic manufacturing capabilities, resulting in a rise in domestic defence procurement from 61% in FY2017 to 75% by FY2025. Private sector players, however, face ongoing challenges in working capital management despite steady gains in revenue and profitability, notes Banerjee.
(With inputs from agencies.)
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