This defence tech stock just bagged an arms license – And DIIs are buying the dip

Modern warfare has evolved, and technology has become an indispensable part of it. Now, wars are being fought with unmanned, automated drones, unmanned, remote-controlled/ automated aircraft, and over the internet.

This is also evident from the increased flow of smart money into the defence tech companies lately.

In one of our previous articles, we explored a defence tech stock that foreign institutional investors (FIIs) bought throughout FY26. Today, we will explore another defence tech stock that domestic institutional investors (DIIs) bought during the January-March 2026 quarter at a significant pace.

The stock is Zen Technologies Limited.

DIIs raised their stake by 2.2% points in this stock during the Q4FY26, taking the overall DII holding to 10.06% at the end of the quarter.

Motilal Oswal Long Term Equity Fund has been one of the biggest buyers of the stock during the quarter, raising its stake from 4.36% at the end of Q3FY26 to 5.96% stake at the end of Q4FY26.

Let’s understand why DIIs, including mutual funds, are loading this defence tech stock up, and that too at such a breathtaking pace.

Zen Technologies Ltd.: The Largest Anti-Drone Systems Supplier in India

Drone attacks have become a common thing in modern-day warfare, and to neutralize these drones, anti-drone systems are required. And this is where Zen Technologies, the largest supplier of the anti-drone systems in the country, comes in.

Zen Technologies has already developed and supplied more than a thousand anti-drone systems globally.

Apart from anti-drone systems, Zen Technologies specializes in developing simulation training equipment for different defence training purposes. For instance, it offers virtual simulation and live simulation for training solutions. The company also offers naval and marine simulation solutions.

Zen Technologies has live ranges for training purposes as well as a combat training centre where these simulators are put to use.

There is another segment where the company is setting its foot firmly, and that is operational equipment. Currently, the company offers force multipliers and IRS systems.

India’s First Modular AI-Powered Counter Drone System

Zen Technologies launched India’s first modular, AI-powered counter-drone system at the beginning of this month at the North Tech Symposium 2026.

This system has a full-spectrum frequency detection facility ranging from 70 MHz to 12 GHz, along with a 15 km-plus detection range and more such features.

Structural Transformation & Expansion

Zen Technologies has been undergoing a structural shift from being a defence tech company to becoming a full-fledged defence company offering automated weapon stations, combat robotics, and has even acquired an arms manufacturing licence recently.

During April 2026, the company received an Arms Manufacturing Licence from the Government of India for manufacturing cannons ranging from 12.7 mm to 40mm.

These cannons are a crucial part of the air defence system and naval operations, especially required in counter-unmanned aircraft systems.

Zen Technologies receiving this licence is a significant step towards India’s Indigenously Designed, Developed, and Manufactured (IDDM) framework.

Aligning with India’s Impenetrable Smart Border Push

Earlier, on 27 May 2026, Zen Technologies unveiled the first Integrated Smart Border Suite (ISBS) in India. As the government pushes for Impenetrable Smart Borders, with advanced technology being used for national security, Zen Technologies has launched this next-generation border security ecosystem.

Solid Order Book with Revenue Visibility

The total order book as of 31 March 2026 stood at ₹1,336 crore, out of which orders worth around ₹113.4 crore were from the subsidiaries. During the Jan-Mar quarter 2026, the company received orders worth ₹431.36 crore.

As per management comments, orders worth ₹1,000 crore will be executed by the end of FY27, offering a clear revenue visibility.

The remaining orders worth ₹326 crore are mostly annual maintenance deals on a contractual basis.

The order pipeline also looks solid with bids placed over ₹1,500 crore, along with a few single vendor tenders, which can add to the order book further, as anticipated by the management.

Orders for anti-drone systems are expected to constitute 55% of the order pipeline, while the remaining 45% would come from simulators.

DIIs are buying despite 31% Drop in Profits.

Sales declined by 29.4% YoY from ₹973.4 crore in FY25 to ₹687.7 crore in FY26. This dragged profits down as well by 31% YoY from ₹280.2 crore in FY25 to ₹193.5 crore.

Management indicated that the lower revenue base during Q4FY26, compared to the strong Q4FY25, was the reason behind the decline in profits, along with higher fixed costs.

Having said that, the management is expecting the revenue to surge up to ₹4,000 crore cumulatively for FY27 and FY28, given the order book position.

Perhaps, this could be the reason why DIIs are raising their stake in this defence tech despite negative profit growth in FY26.

Coming to the returns, Return on capital employed (ROCE) of Zen Technologies stood at 16.2%, at par with the industry median, while its dividend yield was at 0.12%, slightly higher than the industry median of 0.04%.

Already trading at a premium?

The stock is trading at a price earnings (PE) ratio of 78.1x, compared to the industry median of 54.4x. Even if we consider growth potential, the price/earnings to growth (PEG) ratio is at 1.2x, higher than the industry median of 0.8x, indicating the stock is relatively expensive.

1-Year Share Price Chart of Zen Technologies Ltd.

Final Thoughts

Even though the sales and profits of Zen Technologies decreased during the last quarter of FY26, DIIs raised their stake, perhaps indicating the future potential of the company. With rising demand for anti-drone systems, coupled with the company’s entry into arms manufacturing, and developing some of India’s first-of-its-kind advanced defence technologies, DIIs might be attracted irrespective of the near-term challenges.

Having said that, it would be interesting to see how management’s outlook and DIIs’ conviction play out in the upcoming days. Till then you can add this stock to your watchlist to keep a close eye on it.

Disclaimer:

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. 

Maumita Mitra is a seasoned writer specializing in demystifying the world of investment for a broad audience. She has a keen eye for detail and a knack for explaining complex financial concepts in the simplest manner possible. 

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

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