Will Indian Defence Entities Experience a Revenue Surge of 15-17% in FY26?

New Delhi, June 18 (NationPress) Entities engaged in the Indian defence industry are forecasted to maintain a strong growth trajectory, with an anticipated revenue increase of 15-17 percent in FY26, according to a report released on Wednesday.

This promising revenue growth is primarily propelled by significant execution advancements supported by a solid order book, with an order book/operating income (OB/OI) ratio standing at 4.4 times as of the end of FY25, as per an analysis by ICRA.

Over the years, the government has executed various policy measures, centered around ‘Atmanirbhar Bharat’, aimed at boosting domestic defence production capabilities, promoting investments, and increasing exports.

These initiatives encompass the liberalization of FDI regulations in the defence sector, the continuation of the defence offset policy, the establishment of two Defence Industrial Corridors, and a persistent focus on indigenization through the introduction of five ‘Positive Indigenisation Lists’ and the online indigenization platform ‘SRIJAN’.

“In addition, the government has raised the budgetary allocation for the sector, emphasizing capital expenditure, which has seen a compound annual growth rate (CAGR) of 8.29 percent over the last five years, reaching Rs 1.92 lakh crore in FY2026 budget estimates (BE),” the report noted.

Through these efforts, the spending on defence procurement from domestic suppliers has risen from 61 percent in FY2017 to approximately 75 percent in FY2025, while exports have surged by more than 15 times at a robust CAGR of 41 percent, reaching Rs 23,622 crore during the FY2017-FY2025 timeframe.

“All entities involved in defence production—spanning land, naval, aeronautical, armaments, and ICT2—will benefit from the consistent growth in budgetary allocations since 2015, which is projected to lead to substantial order inflows as the government continues to amplify domestic procurement,” stated Suprio Banerjee, Vice President and Co-Group Head, Corporate Ratings, ICRA.

The weighted average operating margins are expected to remain robust at 25-27 percent for FY2026, bolstered by economies of scale and increased localization, as companies begin to produce more value-added system-level products, as opposed to merely manufacturing sub-components and assemblies, Banerjee elucidated.

While the land and ICT segments are poised to witness greater private sector involvement, the defence public sector undertakings (DPSUs) continue to lead in the naval, aerospace, and armaments sectors.