There’s something oddly surprising about defence policy. Between fighter jet flyovers and the weapon expo, it’s easy to forget that what’s at stake isn’t just sovereignty — it’s supply chains, capex pipelines and yes, stock market multiples.
This March, India’s Defence Secretary Rajesh Kumar Singh made his way to Italy. The headline said “strengthening bilateral defence ties.”
Singh met Italian Defence Minister Guido Crosetto to talk about everything from maritime security to defence-industrial cooperation. An MoU was signed between SIDM (Society of Indian Defence Manufacturers) and AIAD (Italy’s Aerospace and Defence Industries Association). But the most important thing may have been the message behind it all: India doesn’t just want to buy arms. It wants to build them.
The ₹20 Trillion Question: Is India Finally Walking the Talk on Defence?
Over the past two years, the Defence Acquisition Council (DAC) has cleared capital proposals worth ₹2.5 trillion — a step behind FY24’s ₹3.5 trillion tallies, but significant in a pre-election, high rainfall year. March alone saw approvals worth ₹540 billion, covering upgrades for the T-90 tank’s engines, procurement of Varunastra torpedoes and Airborne Early Warning & Control systems — with rub-off benefits for Bharat Electronics (BEL) and Astra Microwave.
That’s three arms of India’s military modernising in parallel, an occasional affair.
But while AoNs (Acceptance of Necessity) are critical, they’re not orders. The real bottleneck lies in India’s infamous procurement delays — a mix of red tape, contract disputes and the slow drip of bureaucratic approvals.
That might change soon.
The government has now slashed acquisition timelines from 96 weeks to 24. The RFP (Request for Proposal) is now to be drafted at the AoN stage itself. Field trials will happen under simulated conditions, not just in deserts and glaciers. Pricing discussions must wrap up within six months.
If implemented well, this could shift sentiment across the board — from suppliers to stakeholders. Moreso since many are still reeling from delayed LCA Tejas deliveries by HAL, despite engines being ordered from GE way back in 2021.
HAL: High Orders, Higher Expectations
If Make in India had a brand ambassador, it would be Hindustan Aeronautics Ltd. At Aero India 2025, HAL showed off everything from the Tejas Mk1A fighter to locally built AESA radars (which replace Israeli imports on 40+ jets).
Five Tejas aircraft are reportedly ready, just waiting on GE’s F-404 engines. Another eight are underproduction. The delay — nearly four years after the original engine order — has spotlighted India’s dependence on foreign suppliers even within the so-called indigenous platforms. HAL’s management, however, maintains that deliveries from GE are now on track, with the first batch expected by April 2025.
What’s at stake is more than just a few delayed jets. As the delayed orders are the gateway to other larger orders: a second batch or even the rollout of a variant, The delayed engines, slated to be produced under license in India, are central to this chain.
In total, HAL is looking at a pipeline worth nearly US$20 billion by FY27.
But it’s not just about new orders. HAL’s backlog — once stagnating — is finally moving. Under Modi 3.0, the company has seen a pickup in order flow, including the large Rs 3,000 crore order for AL-31FP engines to power Sukhois and growing visibility in helicopter engine platforms like the HTSE-1200.
BEL, BDL and the Missile Play
While HAL takes centre stage in aerospace, BEL and Bharat Dynamics (BDL) quietly corner the electronics and missile space. BEL, India’s state-run electronics major, is gearing up for its biggest-ever contract, expected to be worth over $4 billion. BDL, meanwhile, stands to benefit from new orders for Varunastra torpedoes, ATGMs and loitering munitions.
FY26 could be a breakout year for these firms, provided the new capital acquisition reforms stick. With the DAC now approving procurement processes in just 24 weeks, instead of two years, the lag between intent and impact could narrow.
It’s not just the large caps either. Astra Microwave, Zen Technologies and Azad Engineering are positioning themselves as high-leverage plays in subsystems and simulators. As India moves towards building more locally, these component specialists will increasingly move from Tier-2 vendors to essential partners.
Export Potential: Signal, Not Yet Scale
For all the talk of Make in India, India’s defence exports still hover around ₹21,000 crore (~$2.5 billion) — a fraction of the US or China, but up 10x from a decade ago. Platforms like the BrahMos, the Tejas and artillery systems have seen interest from Southeast Asia, Africa and the Middle East.
But scaling this requires not just platforms. It needs trust — in supply chains, in delivery timelines and in after-sales support. India’s best shot at becoming a serious exporter lies in resolving its internal delays and leveraging its cost advantage.
The HAL-GE engine deal, the Airbus C295 assembly line with TASL and proposed partnerships with Italy and France could catalyse this shift — if India can meet deadlines and offer quality assurance.
A Capex Lens: Defence Still Trails Roads and Rails
According to the January and March reports, the Ministry of Defence capex grew from ₹998 billion in FY19 to ₹1,678 billion in FY24 — a 68% increase. But this pales in comparison to the 90%+ increase in roads and railways.
Why? Probably because defence spending is more complex, politically sensitive and import-reliant. While ministries like Roads and Railways have smoother execution mechanisms, defence contracts go through multiple evaluations, field trials and inter-ministerial reviews.
But the government seems aware. By tying defence to its larger infrastructure narrative — think shipyards, aerospace corridors and defence industrial zones — it is attempting to give the sector a more consistent capex profile. If FY26 sees both order finalisation and manufacturing execution improve, defence could become a more central cog in India’s capex story.
Market View: A Sector on Pause or Reacceleration?
After a blistering 2023, defence stocks cooled off. HAL, BEL and BDL saw corrections of 18–30% from their peaks. Investor concerns stemmed from stretched valuations, delayed execution and geopolitical risks to key imports like engines and electronics.
But these could be a great entry point.
The thesis is simple: order books are growing, execution is expected to improve and stock prices have corrected.
If Modi 3.0 can implement the acquisition reforms and front-load key orders before FY26, the sector may be in for another leg up. Especially as global defence spending continues to rise amid ongoing geopolitical tensions.
The Real Test: Delivery, Not Decibels
India has made its intentions clear. It wants to become a manufacturing hub, a defence exporter and a technology powerhouse. But success won’t be judged by MoUs or flyovers.
It will depend on whether five Tejas jets gathering dust in a hangar finally get engines. Whether simulators built in Hyderabad are integrated in frontline regiments. And whether global OEMs see India not just as a buyer, but as a reliable partner.
There’s no denying the policy momentum. But this is still a sector caught mid-air — with one wing chasing self-reliance and the other tangled in red tape. If the engine arrives on time, Make in India may yet take off. If not, it risks becoming yet another well-meaning programme stuck on the tarmac.
Disclaimer
Note: We have relied on data from http://www.Screener.in throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information.
The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Manvi Aggarwal has been tracking the stock markets for nearly two decades. She spent about eight years as a financial analyst at a value-style fund, managing money for international investors. That’s where she honed her expertise in deep-dive research, looking beyond the obvious to spot value where others didn’t. Now, she brings that same sharp eye to uncovering overlooked and misunderstood investment opportunities in Indian equities. As a columnist for LiveMint and Equitymaster, she breaks down complex financial trends into actionable insights for investors.
Disclosure: The writer and his dependents do hold the stocks discussed in this article.
The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.