The defence indigenisation drive in India is moving deeper into the military supply chain, creating opportunity for companies that make the electronics, radars, sensors and other critical subsystems that sit inside modern weapons and platforms. The shift is visible in the Defence Ministry’s sixth Positive Indigenisation List (PIL), which covers 405 items with an estimated domestic business opportunity of around Rs 3,070-3,100 crore through FY32.
Unlike the previous indigenisation lists that focused more on complete platforms and weapon systems, the recent list is more focused on line-replaceable units (LRUs), raw materials, spares, components, subassemblies and subsystems.
According to Kotak Institutional Equities, defence electronics account for around 56% of the items in the latest list, making it the largest category. Meanwhile, aerospace accounts for another 21% with the remaining items spread across missile, naval and land systems.
For companies such as Bharat Electronics Ltd (BEL), Data Patterns (India), Astra Microwave Products and Paras Defence and Space Technologies, that points to a potentially expanding addressable market as India seeks to reduce its dependence on imported military electronics.
The PIL shift: Localising line replaceable units and subsystems
The first phase of defence indigenisation in India was more about producing platforms domestically such as artillery, missiles, fighter aircraft and helicopters. The new phase comes in more detail. Taking a fighter aircraft for instance, it requires radar, avionics, electronic warfare systems, communications equipment, sensors and fire-control electronics. The sixth PIL seeks to localise more of these components.
According to the brokerage firm, it identified BEL, Astra Microwave, Data Patterns and Paras Defence among listed companies that could benefit from the electronics-heavy list. The opportunity is bigger than the headline Rs 3,100 crore. As more major defence platforms are manufactured and inducted in India, the ecosystem of suppliers supporting those platforms could also expand.
BEL and HAL lead the subsystem allocation
BEL is the largest company at the centre of this opportunity. According to Kotak’s analysis of the sixth PIL, 227 of the 405 items are linked to BEL, while 86 are linked to Hindustan Aeronautics Ltd (HAL). Together, the two account for around 77% of the items in the list. BEL is already India’s market leader in defence electronics.
Meanwhile, Antique Stock Broking, in its August’s report, said BEL is targeting more than 15% revenue growth in FY27, with an EBITDA margin of above 28%. The company is also targeting around Rs 55,000 crore of order inflows in FY27.
Its existing and prospective programmes include LR-SAMs, LCA Mk1 and Mk1A LRUs, BMP-2 upgrades, Ashwini radar, electronic warfare suites for Mi-17 V5 and the MPR Arudra radar. BEL also expects the QRSAM programme, estimated at around Rs 30,000 crore, to be finalised by Q2FY27, according to Antique.
Private sector participation: Data Patterns, Astra, and Paras Defence
The indigenisation opportunity is also reportedly pushing BEL to deepen localisation within its own supply chain. Antique said BEL is targeting zero imports of subsystem modules over the next five years. To support this effort, the company plans around Rs 1,200 crore in fresh capital expenditure during the fiscal year and around Rs 2,200 crore in R&D spending, according to the brokerage.
Currently, indigenous products account for approximately 78-80% of BEL’s turnover, with the proportion expected to rise further. That creates a direct link between policy and corporate investment.
Sector valuations and R&D dynamics: The growth catch
While BEL represents the scale of India’s defence-electronics opportunity, Data Patterns offers a view of how the private sector can participate in the same ecosystem. Kotak has identified Data Patterns among the listed defence-electronics companies that could benefit from the sixth PIL.
The company has capabilities across defence and aerospace electronics, including radar systems. The firm also highlighted its micro-Doppler radar technology for drone detection, giving the company exposure to the rapidly expanding counter-drone segment. Recently, Data Patterns received an order worth around Rs 585.76 crore from BEL for procurement of radar electronics, according to the company’s August 21 exchange filing.
The company also disclosed that its order book stood at Rs 2,654 crore as of July 30, including orders received and negotiated. Subsequently, it received orders worth Rs 771.08 crore, taking the disclosed order position higher.
Astra Microwave targets the radar opportunity
Astra Microwave Products represents another specialised part of the electronics ecosystem in defence. The brokerage identified the company as a potential beneficiary of the sixth PIL, particularly as India expands its domestic capabilities in radar and radio-frequency systems. On July 30, the company won a Rs 2,205.23 crore order for the procurement of 122 AAAUs and 121 interface frames for the Uttam radar, according to the company’s disclosure.
The order also revealed the interest in domestic suppliers in advanced radar programmes. While BEL operates across a range of electronics and systems of defence, companies such as Astra Microwave occupy more specialised positions in the radar and RF segment.
Paras Defence adds the counter-drone angle
Paras Defence and Space Technologies is another company that is identified by Kotak as a potential beneficiary of the electronics-heavy indigenisation push. Its opportunity extends beyond conventional defence electronics into the fast-growing counter-drone market.
In June 2026, Paras Defence received a Rs 52.8 crore order from BEL for the supply of electro-optics, according to its exchange filing. Counter-drone systems require several electronics-intensive technologies, including detection systems, sensors, jammers, fire-control systems and electro-optical equipment.
Kotak has estimated India’s counter-drone demand at around $5 billion over the next decade, equivalent to roughly 20-25% of projected drone spending. The brokerage also estimated the domestic market for various counter-drone technologies including hard-kill systems, anti-drone fire-control systems, jammers and high-energy lasers at around Rs 35,000-45,000 crore.
Zen adds another layer to the electronics ecosystem
The counter-drone opportunity is not limited to electronics manufacturers. Zen Tech, for instance, received a Rs 295 crore order from the Ministry of Defence for simulators on August 10. In the company’s disclosure, it revealed how the defence-modernisation cycle is generating opportunities across adjacent technologies, from physical systems and electronics to training and simulation.
However, for electronics companies, the importance of the counter-drone market lies in the amount of technology embedded in these systems. Detection, identification, tracking, command and control and electronic countermeasures all require complex sensors and electronics.
The opportunity extends beyond four companies
The sixth PIL should not be viewed as a four-company opportunity. Kotak’s assessment is that the shift towards components and subsystems could benefit a much wider defence manufacturing and MSME ecosystem. A company does not need to manufacture an entire fighter jet, missile or warship to participate in the programme. It can supply a radar component, communication module, sensor, fire-control subsystem, LRU, electronic assembly or specialised spare.
India’s defence ordering cycle provides the backdrop
The electronics opportunity in India is emerging alongside a bigger expansion in defence procurement. Antique estimates that the Ministry of Defence approved Acceptance of Necessity proposals worth around Rs 6.7 lakh crore in FY26, creating a sizeable future ordering pipeline. Although delays in programmes such as P-75I submarines, QRSAM and next-generation corvettes affected order inflows for listed defence PSUs during FY26, the brokerage expects ordering momentum to improve.
The indigenisation push is also intersecting with India’s defence-export ambitions. Antique said BEL had an export order book of around $465 million and was pursuing opportunities worth four to five times that amount. The company reportedly expects to convert around $300 million into orders during FY27, according to the brokerage.
Valuation of defence sector companies pricing in positives
The opportunity comes with a valuation catch. Kotak said the country’s defence companies were trading at roughly 50 times one-year forward earnings, compared with around 28 times for global peers, a premium of about 50%. The premium shows expectations of faster growth, but it also raises the bar for order conversion and earnings execution.
There is another limitation. The brokerage firm estimates that Indian defence manufacturers spend around 3.5% of revenue on R&D, compared with about 5.9% for global peers. The brokerage attributes part of the difference to India’s reliance on DRDO for core research and the industry’s historical emphasis on localising proven technologies and platforms through technology transfers.
DRDO issued more than 250 technology-transfer licensing agreements to Indian industry in FY24, according to the report.
The deepening of India’s defence strategy
The sixth PIL signals a subtle but important change in India’s defence manufacturing strategy. The country is no longer only asking who can build the fighter aircraft, helicopter, missile or warship. It is asking who can manufacture the radar, sensor, communication system, electronic module and subsystem inside it.
(Disclaimer: This article discusses defence electronics indigenisation policies, specific listed securities (BEL, Data Patterns, Astra Microwave, Paras Defence, Zen Technologies), and third-party order inflow and valuation forecasts from Kotak Institutional Equities and Antique Stock Broking. While it provides sector insights, forward-looking order estimates and stock valuation commentary are based on brokerage research and involve execution risks. Readers should treat these details as informational and consult a SEBI-registered investment advisor before making investment decisions based on these company-specific estimates.)