According to a survey by the Investment Information and Credit Rating Agency (ICRA), entities in the Indian defense sector are anticipated to experience strong economic momentum, with revenue expansion of 15–17% in FY2026.
This rise is attributed to good execution success, which is reinforced by a strong order book position and an order book/operating income (OB/OI) ratio of 4.4 times as of the end of FY2025.
Suprio Banerjee, Vice President and Co-Group Ratings for ICRA, said, “According to ICRA’s analysis, entities across the entire spectrum of defense production – land, naval, aeronautical, armaments & ammunition, and ICT2 – will benefit from the sustained expansion in budgetary outlay since 2015, which is expected to translate into healthy order inflows as the Government continues to increase domestic procurement.”
In FY2026, businesses’ operating margins will continue to be strong due to increased localization.
“In contrast to the previous sub-component/assembly manufacturing, the weighted average operating margins are expected to remain healthy at 25–27 percent for FY2026, supported by economies of scale, rising localization, and entities beginning to undertake the production of more value-accretive system-level products,” Banerjee continued.
Through a number of programs, including Atmanirbhar Bharat, the Indian government has improved the country’s capacity to produce defenses, attracting foreign investment and increasing exports.
Exports have grown more than 15 times and at a robust CAGR of 41% to Rs. 23,622 crore during the FY2017-FY2025e period, while defense procurement from domestic suppliers has expanded from 61% in FY2017 to almost 75% in FY2025e as a result of these activities.
With an emphasis on capital expenditures, the government has also increased the sector’s budgetary allocation, which increased to Rs. 1.92 lakh crore in FY2026 BE at a compound annual growth rate (CAGR) of 8.29 percent over the preceding five years.
Also check:- France bans advertising fast fashion
Banerjee said, “Working capital management has remained a challenge for the private players in this segment, despite revenues and profitability growing on a sustained basis during FY 2015-25.”
