India’s defence story has been changing rapidly over the past few years, since the “Make in India” mission was introduced.
What was earlier a market ruled by foreign suppliers is seeing a revolution, with both domestic public and private firms focusing on it.
The country is creating its own radars, drones, avionics, and even AI-driven combat systems. The news headlines may be focusing on the state-of-the-art fighter jets and missiles, but there is one more story quietly unfolding in the stock market.
Several defence manufacturers in India in the last three years have grown multi-fold, showing that their businesses are not only pioneering but financially healthy too.
At the same time, some of these companies have low or slightly elevated EV/EBITDA ratios, suggesting that the market may not have valued their earnings potential yet.
EV/EBITDA is a financial ratio that shows how a business’s market value (Enterprise Value) is compared to the profit it generates before interest, taxes, depreciation, and amortisation.
A company that has consistent growth with a modest valuation has the potential to be a long-term winner, which perhaps most investors have overlooked, especially those investing in AI.
Zeroing in on these stocks
We are on a quest to find promising aerospace and defence (A&D) businesses. So, we looked at listed companies with steady growth over the past three years, with low or moderate EV/EBITDA ratios than their median ratio. Also, these companies must have a segment focusing on new technologies like artificial intelligence (AI), to drive progress in the defence sector.
Based on these filters, three private-sector firms emerged: MTAR Technologies, Paras Defence & Space Technologies, and Avantel Ltd.
Let’s dig into each of these companies and find out more about them.
MTAR Technologies’ Precise Manufacturing With AI
Based in Hyderabad, MTAR Technologies is among the finest precision engineering companies in India. It produces components and equipment for nuclear, space, defence, and clean energy.
It also supplies water-lubricated bearings, ball screws, electro-mechanical actuation systems, and ASP assemblies to different sectors. From engines for ISRO rockets to DRDO parts, MTAR Technologies is at the core of India’s advanced-tech engineering system.
With AI-driven quality control and smart manufacturing production processes and global partnerships in clean energy and defense, MTAR is slowly becoming more than a contract manufacturer: it’s becoming a solutions provider in advanced engineering.
Financially, the company has grown consistently. In Q1 FY26, MTAR’s revenues increased to ₹157 crore, a YoY growth of 22.11% from ₹128 crore in Q1FY25. Net profits during the same period rose to ₹11 crore from ₹5 crore, excluding exceptional items, supported by stable margins. It translated to a 147% jump YoY.
Operating margins remain steady in the 18-19% range, which is strong for a capital-intensive manufacturer. The stock price grew at a CAGR of 4% while the average return on equity (ROE) stands at about 11% over the last three years.
These are healthy numbers considering the long-cycle nature of the defence and clean energy businesses.
Is MTAR also attractive from a valuation perspective? The stock trades at a slight premium EV/EBITDA multiple of 42.25 compared to the industry median of 36.65. It means there’s room for relative re-rating as order books expand and the business grows. However, one should note, that a relatively cheaper valuation does not guarantee a re-rating, as that depends on several other factors too.
For investors looking at defence manufacturing with a mix of stability and upside potential, MTAR is a strong contender.
Paras Defence & Space Technologies
Paras Defence is among the leading businesses in the aerospace and defence sectors. It manufactures, designs, develops, and tests engineering products and solutions.
If MTAR is about precise engineering, Paras Defence is about optics, electronics, and new-age defence systems.
The company builds electromagnetic pulse protection, drone technologies, and space arrangements for DRDO, ISRO, and private space players. It is the only supplier of critical imaging gears, such as large optics and diffractive gratings for space applications.
Its PARAS.AI platform offers cutting-edge analytics for drone data and surveillance, while Logic Fruit Technologies, one of its investments, helps strengthen its position in AI-driven embedded systems. It is also working on AI-powered radar and electronic warfare systems to become a leader in the tech space.
According to Screener.in, the financial performance shows a stable rise over the last three years. The sales moved from ₹84 crore in Q1FY25 to ₹93 crore in Q1FY26, while net profit improved slightly from ₹14.11 crore to about ₹14.27crore during the same period.
However, the operating margin was 23% in Q1FY26, compared to 29% the year before. It remains respectable, considering the high R&D expenditure the business needs.
The stock price grew at a CAGR of 25% over 3 years and the average ROE of 10% over the last three years. It also means the company is still in its growth and investment phase.
Its EV/EBITDA multiple of 53.50 is at a premium compared to the industry median of 36.65. Yet, compared to Bharat Dynamics’s 63.8, Apollo Micro System’s 76.70, it is lower, suggesting the market for various reasons assigns a lower multiple to the company.
For investors looking for exposure to drones, optics, and AI-driven systems, the Paras offers both growth potential and relative undervaluation.
Avantel Ltd, the Communication Pillar
Avantel Ltd may not have the scale of MTAR or Paras yet, but it has quickly become an important player in India’s defence communication ecosystem.
Situated in Hyderabad, the company designs, develops, and maintains wireless and satellite communications, digital radios, defence electronic systems, and more.
These products are the mainstays of armed forces’ secure communications. A role that is increasingly gaining importance as combat moves to network-centric operations.
Moreover, it has integrated AI enhancements in its radio and satellite communication solutions, especially to process signals and interpret real-time data.
With steady orders from DRDO and Bharat Electronics, Avantel has become a vital supplier of native communication technology.
Money-wise, Avantel’s revenue was almost stagnant at 51.91crore in Q1FY26 as compared to Q1FY25. The net profit fell from ₹7 crore to ₹3 crore (excluding exceptional items) during the same period. Importantly, the operating margins have stayed robust, at 20.13% during this period.
However, the stock price has grown at a CAGR of 46% over 3 years, while the average return on equity (ROE) has been ~ 31% in the last three years.
However, unlike MTAR, Avantel does not trade at a discount. Its EV/EBITDA multiple at 56.03 is higher than the median of 36.65, showing the market’s confidence and readiness to pay a premium for steady growth.
Why you should pay attention
India’s defence story is no longer just about jets and missiles. It’s about AI drones, embedded systems, and precise engineering. And it’s also a story that is quietly reflected in the numbers on the balance sheet.
India’s private defence sector is poised for growth. Per the August 9 press release from the Defense Ministry, this sector accounted for 23% of defense production in FY25.
But investing in such firms is not without risk. The order flows can be uneven, tech adoption cycles are long, and estimates can vary. And overall, the valuations are not cheap, with a lot of expectations already built into the price.
For long-term investors, spotting companies with low or moderate EV/EBITDA, strong growth, and technology adoption could mean being part of India’s next big industrial revolution without paying a premium today.
Disclaimer
Note: We have relied on data from 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.
Archana Chettiar is a writer with over a decade of experience in storytelling and, in particular, investor education. In a previous assignment, at Equentis Wealth Advisory, she led innovation and communication initiatives. Here she focused her writing on stocks and other investment avenues that could empower her readers to make potentially better investment decisions.
Disclosure: The writer and her dependents do not hold the stocks discussed in this article.
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