Unlocking Potential: India’s Defence Industry Set for Explosive Growth with Profit Margins of 25-27% – Insights from ICRA

Entities in India’s Defence sector are set for impressive growth. Revenue is expected to rise by 15-17% in FY2026, according to a report by the Investment Information and Credit Rating Agency (ICRA). This growth reflects strong progress in completing projects, supported by a robust order book.

The order book-to-operating income (OB/OI) ratio stands at an impressive 4.4 times as of FY2025. Suprio Banerjee, Vice President at ICRA, explains that all areas of Defence production—including land, naval, and aeronautics—will benefit from increased budget allocations since 2015. The government’s push for domestic procurement continues to fuel healthy order inflows.

With the shift towards local production, companies are expected to maintain solid operating margins in FY2026. Banerjee notes that margins could reach 25-27%, aided by larger production scales and an increasing focus on high-value products rather than smaller components.

Recent initiatives like Atmanirbhar Bharat have substantially improved India’s Defence production capabilities. Domestic procurement has increased from 61% in FY2017 to about 75% in FY2025. Exports have grown over 15 times, reaching ₹23,622 crore, with an impressive CAGR of 41% from FY2017 to FY2025.

The government’s capital budget has also risen, averaging an 8.29% annual increase over the last five years to ₹1.92 lakh crore in FY2026. However, Banerjee points out that working capital management remains a hurdle for many private companies in the sector, despite overall revenue growth.

This trend aligns with broader global shifts, where defense industries are increasingly investing in local supply chains. As countries prioritize national security and self-sufficiency, the Indian Defence sector is positioning itself as a crucial player.

Recent user reactions on social media highlight optimism for India’s growing Defence capabilities. Many believe that this growth not only strengthens national security but also boosts the economy by creating jobs and fostering innovation.

In summary, as India’s Defence sector evolves, it embraces both challenges and opportunities. Continued support from the government and a focus on domestic production will be key to its future success.

For more on defense spending trends, you can check this report from Statista.

Source link

defence,indian defence industry,government of india,Atmanirbhar Bharat