Defence stocks in focus: Why Kotak maps a new growth phase for MTAR, Zen Tech and Astra Microwave

Instead of being driven only by bigger government orders, the next leg could come from advanced technologies, exports, anti-drone systems, radar electronics, civil nuclear projects and artificial intelligence (AI) data centres. At least that is what the brokerage house Kotak Institutional Equities believes after meeting the management teams of several defence companies and visiting their manufacturing facilities.

Kotak: FY27 drivers for defence sector

According to Kotak institutional report, FY27 could emerge as an important year for India’s defence manufacturing ecosystem. Larger order books, better execution, improving working capital and a stronger focus on products designed and built in India are creating new opportunities for companies across the value chain.

Among the names that stood out during the interaction were MTAR Technologies, Zen Technologies and Astra Microwave Products. 

Although these companies operate in different segments, the brokerage believes each company is building multiple growth drivers beyond its core business.

A look at Kotak’s key defence themes

Why is FY27 becoming such an important year?

The brokerage house Kotak in its report noted that the common thread across these companies is not just larger order books. The key factor to watch is that new businesses are beginning to contribute alongside their traditional operations.

The report added that the companies are seeing stronger demand visibility for the next two to four years, while defence procurement is increasingly favouring products that are Indigenously Designed, Developed and Manufactured (IDDM) under the upcoming Defence Acquisition Procedure (DAP) 2026.

So as per the brokerage house report, this shift could help companies that already have in-house design capabilities and are moving up the value chain.

Can MTAR Technologies become more than a clean energy company?

For many investors, MTAR Technologies is closely associated with clean energy. But according to the brokerage report, that may gradually change.

The company has reiterated its guidance of nearly 80% year-on-year revenue growth to around Rs 1,600 crore in FY2027. This was supported by an expected Earnings Before Interest, Taxes, Depreciation and Amortisation (EBITDA) margin of nearly 24%.

The brokerage house added, “Clean energy remains the anchor; Bloom relationship intact and price-protected.” While clean energy is still expected to contribute nearly 70% of revenue, new businesses are steadily gaining ground.

One of those businesses is AI data-centre infrastructure. MTAR has signed a long-term agreement with Schlumberger and has already secured its first export order. According to the brokerage report, this segment alone could generate Rs 400-500 crore over the next few years.

The brokerage also noted that “Civil nuclear scaling up with sharp efficiency push.” Apart from a strong order book, the company expects project execution timelines to reduce significantly. Similarly, on the other side, fresh opportunities could emerge from reactor refurbishment and new nuclear projects.

Defence and aerospace remain another area to watch. Kotak institutional report added that MTAR is supplying structural assemblies, landing gear components and actuator systems while also targeting programmes such as the Light Combat Aircraft (LCA) Tejas and the Advanced Medium Combat Aircraft (AMCA).

Another positive highlighted by Kotak is improving financial discipline. The company has reduced its net working capital days below 200.

Is Zen Technologies entering its biggest opportunity yet?

Zen Technologies built its business around defence training simulators. But according to Kotak Institutional Equities, the company’s next growth phase could come from completely different products.

Management has maintained its guidance of nearly Rs 4,000 crore in cumulative revenue over the next two years.

Kotak institutional report added, “Hyperstrike interceptor drone is the key strategic pivot.” 

The brokerage also believes “Anti-drone franchise is the structural moat.” According to the report, Zen remains among the few companies approved by the Ministry of Defence to offer a complete anti-drone system that combines drone detection, tracking, radio-frequency jamming and hard-kill capabilities on a single platform.

Another product attracting attention is Vrishabh, an autonomous unmanned ground vehicle designed for logistics, surveillance and combat support. 

Kotak further said “Directed energy and laser weapons are the next leg of optionality.”

As per Kotak Institutional report, the focus on IDDM under DAP 2026 could benefit companies such as Zen that develop most of their products in-house.

Why is Astra Microwave quietly becoming a key defence electronics player

Unlike companies manufacturing large defence platforms, Astra Microwave Products operates behind the scenes.

Its products include radar systems, missile seekers, electronic warfare equipment and radio frequency electronics that are used in several defence programmes.

The brokerage report highlighted nearly 80-85% of the company’s revenue comes from defence-related business, with Bharat Electronics (BEL) remaining one of its major customers.

The brokerage believes one of the biggest long-term opportunities lies in the Active Electronically Scanned Array (AESA) radar for the Light Combat Aircraft Tejas. 

The report added “MMIC ownership is the core moat.” The company designs its Monolithic Microwave Integrated Circuit (MMIC) technology in-house.

What could investors watch next?

According to Kotak Institutional Equities, whether it is AI-linked infrastructure, anti-drone systems, missile electronics or advanced aerospace manufacturing, FY27 could become an important year to watch for these three defence companies as new opportunities begin moving from the pipeline to execution.

Disclaimer:The financial projections, revenue guidance, and business analysis mentioned in this article are based on a comprehensive institutional brokerage report by Kotak Institutional Equities. These details are intended solely for educational and informational purposes and do not represent the direct editorial views of this publication, nor do they constitute specific buy, sell, or hold recommendations for MTAR Technologies, Zen Technologies, or Astra Microwave Products. The Indian defence sector and electronics manufacturing involve complex regulatory environments, technology risks, and shifting government capital expenditure priorities; readers should evaluate their investment decisions in consultation with a SEBI-registered financial advisor. This disclaimer has been generated using AI to support user well-being and responsible content consumption.