Private Defence Revenue Growth Set to Soar in 2025-26

Mumbai : Private defence companies are set to clock 16-18 per cent revenue growth in the current financial year as domestic demand remains strong, according to a Crisil report released on Tuesday.

These companies achieved a 20 per cent compound annual growth rate (CAGR) between fiscal 2022 and 2025. Strong government policies have encouraged sizeable private investments, supporting this growth momentum. Investments in research and development (R&D) and capital expenditure have strengthened company capabilities, enabling them to secure larger orders. Analysts expect profitability to remain stable, with operating margins ranging between 18-19 per cent.

Equity infusions over the past three fiscal years have kept company balance sheets healthy, despite rising working capital requirements and planned capital expenditure.

Crisil Ratings analyzed data from over 25 private defence companies, which together generate nearly half of the industry’s revenues.

Although public sector undertakings dominate India’s defence industry, private companies are steadily increasing their revenue share. They have leveraged strong government support for domestic procurement and self-reliance, benefiting from higher capital outlays and increased military spending due to geopolitical uncertainties.

This environment has attracted significant capital through initial public offerings and private equity investments, enabling companies to fund innovation and R&D comfortably.

Jayashree Nandakumar, director at Crisil Ratings, said: “Over the past three fiscals, defence companies received around Rs 3,600 crore in equity infusions on a net worth base of Rs 4,760 crore at the end of fiscal 2022, primarily through public offerings and private equity. Companies invested nearly half of this funding in capital expenditure, R&D, and innovation, which enhanced capabilities and helped them secure larger orders.”

With enhanced capabilities, private defence companies will continue to strengthen their order books, supported by the Emergency Procurement Plan and key government initiatives, including Atmanirbhar Bharat, the Defence Acquisition Policy, and the Defence Production and Export Promotion Strategy. These policies encourage indigenisation and exports.

Analysts estimate that overall order books will rise to around Rs 55,000 crore by the end of this financial year from Rs 40,000 crore at the end of fiscal 2024. Segments driving this growth include electronic warfare systems, C4 (command, control, communications, computers, and intelligence) systems, and aerospace equipment and components.

A strong order book enhances revenue visibility. Companies expect revenues to grow 16-18 per cent this fiscal, and the presence of built-in price escalation clauses in contracts will help maintain stable operating margins around 18-19 per cent.

–IANS