Indian Defence Industry: According to a Nomura report titled “India Defence,” the Indian defence industry has a lucrative ordering opportunity worth $138 billion over FY24–32 due to the growing demand for defence technologies, equipment, and services. This presents significant opportunities for companies involved in defence production and technology development.
According to the report, India’s capital expenditures for defence are expected to rise significantly from the estimated 29% of the total budget in FY25 to 37% by FY30. This amounts to a capital outlay of Rs 15.5 trillion cumulatively over FY24–30, which is a significant increase over prior decades.
“India’s government is actively supporting the defence sector through favourable policy reforms, incentives, and initiatives to promote indigenous manufacturing and technology development. We expect the share of defence capital outlay to increase to 37% of the total defence budget in FY30 (FY24RE: 26%). This implies a cumulative capital outlay of USD186bn over FY24-30 (vs cumulative FY18-24F: USD93bn),” the research stated.
According to the research, this growth can be attributed to rising defence spending, modernization activities, and government support for domestic manufacturing through programs like “Make in India.”
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According to Times of India, the paper claims that there are profitable opportunities in the defence industry for some different market segments. A total of USD 50 billion is invested on aeroplanes, helicopters, unmanned aerial vehicles (UAVs), avionics, and related technologies in the defence aerospace sector alone. A further enormous area of promise is defense shipbuilding, which has a USD 38 billion potential for naval vessels, submarines, patrol boats, and support ships to enhance maritime security.
In keeping with India’s goals to enhance its artillery and missile capabilities, an estimated USD 21 billion would be spent on missile, artillery and gun systems. Furthermore, mentioned in the study is the sharp rise in defence exports, which have reached USD 29 billion, and the tendency is expected to continue.
Hindustan Aeronautics (HAL) shares have a potential upside of 28% due to its strong moat in fighter aircraft and helicopters and significant capability upgrades that provide the basis for the development of an indigenous engine program. Bharat Electronics has a potential upside of 32% due to its increased visibility on order inflows, conviction on margin delivery, and expansion in return ratios, according to the study. Shares in Bharat Electronics have climbed by 109% to Rs 227 over the last year, while those in HAL have climbed by 156% to Rs 3877.
The Indian government is aggressively supporting the military industry by enacting programs, providing incentives, and altering laws to promote indigenous manufacturing and technology development. Businesses working in the defence industry benefit from this support.
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The study also emphasizes how India’s defence industry is putting more and more emphasis on expanding its global reach through exports, knowledge transfer, and collaboration.
Experienced companies in defence production and technology development are well-positioned to benefit from export opportunities, broaden their revenue streams, and grow their market share.
The report says that Bharat Electronics has the potential because it can see more orders coming in, is sure it can deliver on margins, and its return ratios are growing. On the other hand, Hindustan Aeronautics (HAL) has the potential because it has a strong moat in fighter aircraft and helicopters and has significantly upgraded its capabilities, which will allow it to build its engine program.
