5 Defence Stocks that go beyond the Guns and Tanks opportunity

“The future of warfare will be defined not by the size of the army, but by the sophistication of its circuits.”

For years, the defence narrative of India has been steel-and-firepower—the missile, the tank, the submarine. But as war becomes an electronic theatre, electronics have become the new spine of national security. Electronic warfare and simulation platforms to surveillance and communication systems, the defence electronics sector is no longer a support utility—it is the control centre.

Defence electronics encompasses sophisticated systems that drive today’s military missions—radars, electronic warfare equipment, tactical communication, simulators, and RF missile and aircraft modules. They do not manufacture chips but design the circuits, connectors, and controls that transform defence platforms into smart, responsive vehicles.

India’s initiative towards self-reliance, coupled with increasing global demand, has thrown open new opportunities for these companies. Strategic alliances, production-linked incentives, and export authorizations are facilitating them to access global defence supply chains, with international OEMs increasingly procuring sophisticated sub-systems from Indian vendors.

#1 Bharat Electronics

Incorporated in 1954, Bharat Electronics (BEL) manufactures and supplies electronic equipment and systems to the defence sector. The company has a limited presence in the civilian market.

BEL remains central to India’s military hardware ecosystem, focusing on high-value systems like radars, EW platforms, software-defined radios, C4I networks, and subsystems for missiles and aircraft. While not a chipmaker, it supplies the electronics that make defence platforms smarter.

On April 1, 2025, BEL’s order book stood at Rs 71,650 crore—3.1x its FY25 revenue of Rs 23,024 crore—providing healthy visibility. Defence is its overarching portfolio, with less than 10% contributed by non-defence. Nearly 40% of the order book is associated with 12 major projects, such as QRSAM and strategic EW systems. Exports increased to $ 106 million in FY25, targeting $ 120 million for FY26, albeit still modest overall.

The pipeline consists of the Rs 30,000 crore QRSAM programme, Project Kusha subsystems (Rs 40,000 crore), and smaller orders to all the forces. But most of them are in nascent stages, and implementation hinges on government approvals, which tend to take a long time.

BEL is looking at 15–17.5% per annum topline growth for the next five years, supported by ~29% EBITDA margins, increasing indigenization, and capex of more than Rs 1,000 crore annually. With 35% of its procurement going through MSMEs, the company is gearing up to scale—but significant upside will be contingent on export momentum and timely execution of flagship orders.

In short, BEL provides transparency and a solid home base, but the ramping up from here will need to be more disciplined execution and bigger export victories.

Bharat Electronics 1-Year Share Price Chart

#2 DCX Systems

Incorporated in 2011, DCX Systems is in the business of system integration and cable & wire harnessing.

DCX Systems is in the high-end defence electronics manufacturing business, with a special emphasis on complex cable harnesses, PCB assembly, and system integration. As of March 31, 2025, the firm boasted a healthy consolidated order book of Rs 2,855 crore—over 2.6x its FY25 revenue of Rs 1,084 crore—reflecting good revenue visibility over the next two years.

Most of this is accounted for by overseas orders, such as Rs 840 crore worth of contracts from Lockheed Martin (USA) and Rs 483 crore from Elta Systems of Israel.

The firm has made a recent foray into radar systems under joint venture with Elta, taking a 37% stake in the venture. The JV will make advanced radar technologies domestically under the ‘Make in India’ policy, with production set to commence within 11 months.

DCX is also gaining traction in the local market with new factories and R&D spend, including NIART’s radar-based safety systems for railways.

Strategically, DCX is making a shift from a “build-to-print” assembler to an OEM with proprietary items. Its strategy includes value addition to improve margins, indigenization of components, and utilization of government schemes such as RoDTEP. While long-term profitability is of concern at present because of customer delays in recovering material cost escalations, the company has robust long-term opportunities both in Indian and international defence markets.

DCX Systems 1-Year Share Price Chart

#3 Astra Microwave Products

Astra Microwave Products is engaged in the business of design, development and manufacture of sub-systems for radio frequency and microwave systems used in defence, space, meteorology and telecommunication.

Astra Microwave Products is increasingly becoming a leading player in India’s defence and aerospace electronics industry. During FY25, the firm saw record standalone revenues of Rs 1,044 crore, which comprised nearly 90% of domestic orders.

This boost is an indication of robust performance in radar systems, electronic warfare, and missile-related subsystems. Export revenues are still low at Rs 79 crore—below 8% of the total order inflow—which underscores Astra’s ongoing reliance on the Indian defence procurement cycle.

The consolidated order book of the company is Rs 2,304 crore, approximately 2.2x of its top-line revenue, with good visibility. Astra has provided a very ambitious guidance of Rs 1,400 crore of new orders in FY26, including a more aggressive Rs 300+ crore export target. But considering trends in the past, sustaining this export mix without more solid global traction is likely to be difficult.

Strategically, Astra is putting money into emerging technologies like anti-drone solutions, small satellite production, and space-grade electronics, and has unveiled a Rs 90 crore capex strategy. It’s also increasing production for flagship programmes like LCA Mk2 and Virupaksha radar. While such moves have long-term promise, execution risks persist—especially regarding working capital intensity, stretched payment cycles, and slowness in finalizing defence orders.

Overall, Astra’s growth prospects are bright on the back of India’s defence self-reliance push, but investors need to moderate expectations and look for prompt order realization, export momentum, and consistent margin performance.

Astra Microwave Products 1-Year Share Price Chart

#4 Cyient DLM

Cyient DLM is a leading electronics system design and manufacturing player, which provides system design, integration, testing, and manufacturing of electronic components and subsystems for original equipment manufacturers (OEMs) in the aerospace and defence sectors and other high-tech engineering segments. It has customers in India, Europe, North America, China and Japan.

Cyient DLM serves in the niche EMS segment, with major focus on high-reliability industries such as aerospace, defense, medical, and industrial. In FY25, the business reported Rs 1,520 crore in revenue, but its order book fell to Rs 1,906 crore from more than Rs 2,100 crore last year. That implies revenue was covering almost 80% of the order book—a reflection of low visibility unless new orders are booked in the near term.

The company’s business mix has become more diversified following the Altek acquisition. Defence, which was earlier the flagship segment, saw a decline in contribution due to the completion of a large 2.5-year Indian defence project.

With that order now fully delivered, the company is witnessing a shift towards medical and industrial segments. Medical now accounts for 35% and industrial for 14%, and the majority of growth in the future will come from export markets such as the U.S. and Europe.

While margins grew to double digits during Q4, it was aided by one-time claims. Sustainable margin, according to management, is still at 10–11%, given volumes return to growth. There are positives on a robust pipeline of sales, new client additions, and U.S. traction (particularly through Altek’s Connecticut facility), but execution timelines are still unclear.

The order book must see a substantive build-up in Q1 or Q2 to sustain whatever growth in FY26. In the meantime, growth would remain subdued in the first half, with the possibility of recovery depending on successful order conversion on time. The strategy remains sound, but short-term prospects are guarded and subject to external demand and geopolitical factors.

Cyient DLM 1-Year Share Price Chart

#5 Paras Defence and Space Technologies

Paras Defence and Space Technologies (PDST) is a private sector company primarily engaged in the designing, developing, manufacturing, and testing of a variety of defence and space engineering products and solutions.

The company caters to four major segments – defence & space optics, defence electronics, heavy engineering and electromagnetic pulse protection solutions.

Paras Defence and Space Technologies is picking up strong pace, but one has to see its growth story in realistic expectations. The company posted a sharp increase in Q4 FY25 profit, pushing the year-to-date profit after tax (PAT) to Rs 60 crore from Rs 30 crore during the previous year. It may sound impressive, but follows from a relatively flat FY24, suggesting this could be more of a bounce-back rather than an unbroken growth run.

The order book currently is in excess of Rs 900 crore—just around 1x its annual revenue—so while visibility is good, it isn’t unusual for a company within this space. The management is optimistic about increasing the order book to Rs 1,500–2,000 crore, but that hinges upon conversion of a Rs 2,000–2,500 crore opportunity funnel, which, while promising, is uncertain and could take several quarters or years to result in actual orders.

Conclusion

India’s effort to become self-reliant in defence and the strategic role of electronics in contemporary warfare have thrown open great opportunities for indigenous players. These players have established strong competence in areas such as radar systems, electronic warfare, space-grade sub-systems, and strategic platforms, with expanding order books and visible top-line pipes.

The industry, however, remains capital intensive, order flows are usually lumpy, and timelines for execution are linked to government clearances.

What also is striking is the shift away from development-intensive contracts towards more production-weighted ones, which should be able to support margins in the future. There are some players venturing overseas, yet exports are still a small percentage of total revenue.

Capital expenditure plans and capacity expansions indicate confidence, but funding and working capital cycles must be closely monitored. As valuations rise, tracking actual conversion of opportunity funnels into tangible revenue will be crucial.

Although prospects for growth seem good, particularly with growing emphasis on indigenization, investors need to balance the possibilities against operational issues, working capital needs, and industry-specific hazards. Peter Lynch once quipped, “Know what you own, and know why you own it.” Prudent due diligence continues to be the mantra prior to any investment decision.

Disclaimer

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Ekta Sonecha Desai has a passion for writing and a deep interest in the equity markets. Combined with an analytical approach, she likes to dig deep into the world of companies, studying their performance, and uncovering insights that bring value to her readers.

Disclosure: The writer and his dependents do not hold the stocks discussed in this article.

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