Is India’s defence story just about bigger budgets, or is something structural changing beneath the surface? According to a recent Goldman Sachs report, the answer may lie not just in higher government spending, but in India’s deeper integration into global aerospace and defence supply chains. After hosting an expert call with Ashish Saraf, Vice President and Country Head of Pratt & Whitney India, the brokerage outlined what it sees as the next phase of opportunity for Indian Aerospace & Defence (A&D) companies.

Let’s take a look at the brokerage say of this sector –

Stocks in focus: Where Goldman Sachs sees opportunity

According to the brokerage report, private defence suppliers with exposure to advanced materials, complex machining, electronics and artificial intelligence-enabled systems are well placed.

The report highlighted that PTC Industries is “fast emerging as a credible processed materials supplier.” Processed materials and specialised alloys are critical inputs in aero engines and high-performance defence equipment, making this a key capability.

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Solar Industries, traditionally associated with explosives, “should be viewed as a defence company owing to the extensive work, the company is doing in the field of ammunition and drones.”

Azad Engineering is described as “one of the key players in Complex component machining in India,” a capability that is essential for aerospace grade components where precision is critical. Meanwhile, Data Patterns is referred to as “one of the key players in Radar Electronics,” placing it in a niche segment linked to advanced defence systems.

Goldman Sachs maintains ‘Buy’ ratings on Solar Industries, Data Patterns, Astra Microwave, Azad Engineering and Bharat Electronics, and also has coverage on PTC Industries. As per the brokerage report, these companies are aligned with the broader defence growth trajectory and domestic Total Addressable Market (TAM) expansion.

Three structural drivers for the defence industry

According to the brokerage report, the expert identified “three vectors for multi-year growth for the Aerospace & Defence (A&D) sector.”

The first is the Union defence budget, which raises capital procurement by 18% year-on-year in FY27 Budget Estimates compared to FY26 Revised Estimates. Higher capital allocation directly benefits domestic defence manufacturers through fresh orders.

The second driver is the proposed European Union-India Free Trade Agreement (EU-India FTA), and the third is the United States-India trade deal. As per the brokerage report, while higher defence spending boosts domestic opportunities, trade agreements “enable them to expand footprint abroad.”

The report also noted that the global aerospace demand remains strong. According to the expert, “bookings in commercial aerospace look robust with engine suppliers globally having order book visibility up to CY35E.”

The broader investment case and risks

According to the brokerage report, increasing Total Addressable Market (TAM) and indigenisation remain central to the domestic defence story. Export potential is improving, although the shift from Build-to-Print (BTP) to Build-to-Specification (BTS) manufacturing may take time.

However, the brokerage flags risks. These include a possible shift in government capital allocation away from defence, delays in product development, and the risk of global OEMs sourcing from other regions.

Conclusion

According to Goldman Sachs, India’s Aerospace & Defence sector appears to be moving beyond just budget driven growth towards deeper integration with global supply chains.