Strong domestic demand, government policies and a Rs 55,000 Cr order book to support expansion; profitability to remain stable at 18-19 per cent
India’s private defence companies are expected to post revenue growth of 16-18 per cent in FY26, according to an analysis by Crisil Ratings. This follows a compound annual growth rate of nearly 20 per cent between FY22 and FY25, driven by strong domestic demand and government reforms.
The combined order book of private defence firms is estimated to touch Rs 55,000 crore by the end of FY26, up from around Rs 40,000 crore in FY24. Growth is expected across segments such as electronic warfare systems, command, control, communications, computers and intelligence (C4) systems, and aerospace equipment.
Crisil said the Emergency Procurement Plan and initiatives, including Atmanirbhar Bharat, the Defence Acquisition Policy (DAP), and the Defence Production and Export Promotion Strategy (DPEPS) are enabling both indigenisation and exports.
Profitability Outlook
Operating margins are expected to remain stable in the range of 18-19 per cent, supported by healthy revenue visibility and built-in price escalation clauses in long-term contracts.
“Over the past three fiscals, defence companies have seen equity infusions of around Rs 3,600 crore on a net worth base of Rs 4,760 crore at the end of FY22, largely through public offerings and private equity. While a third of such monies went into working-capital funding, almost half was utilised for capital expenditure, research and development, and innovation, thus enhancing capabilities among private sector defence companies,” said Jayashree Nandakumar, Director, Crisil Ratings.
Capex And Investments
Private defence companies are projected to spend about Rs 1,000 crore each on capital expenditure (capex) and incremental working capital in FY26. Most of this will be funded through internal accruals.
“Companies are expected to incur Rs 1,000 crore towards capex and an equal amount for incremental working capital this fiscal. The majority of this will be funded through internal accruals and hence debt levels are unlikely to go up in the current fiscal,” said Sajesh K V, Associate Director, Crisil Ratings.
