Amit Anwani, Research Analyst, PL Capital in an interview to ET Now, noted that the government is actively promoting MSME participation and supporting startups through programs like iDEX. “At least 3,000 crores has been allocated to smaller platforms. Structural changes are being made to localise defence production. Domestic procurement has gone up from 71,000 to almost 1,20,000 in three years, showing strong growth and signalling a 16-17% industry CAGR,” he said.
Public sector defence companies have also seen a significant re-rating. Order books for firms like Bharat Electronics (BEL) have doubled or tripled in the past three to four years, driven by platforms moving from development to production stages and faster project execution. BEL’s order intake this year is expected to exceed one lakh crore, supporting 14-15% growth over the next three to four years.
Supply chain risks remain, particularly for companies like HAL that rely on imported engines. Efforts are underway to localise components and pursue technology transfers for critical systems. This focus on localisation and robust order pipelines ensures a steady growth trajectory, with HAL expected to sustain a 13-14% CAGR over the next five to seven years.
Anwani highlighted defence electronics as a key growth area. “Companies like Astra Microwave and Apollo Micro Systems have grown 30-40% CAGR, with PAT doubling and margins improving significantly. Small private companies could be major beneficiaries over the next two to three years, supported by MSME and R&D initiatives like iDEX,” he said.
With policy reforms, increased localisation, and government-backed incentives, India’s defence sector is set for a new era of innovation, robust growth, and stronger participation from startups and MSMEs.
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