ICICI Securities remains optimistic about India’s defence manufacturers as policy support, export growth, and a strong order pipeline position the sector for long-term expansion, with key picks including Hindustan Aeronautics and Bharat Electronics.
ICICI Securities remains constructive on India’s defence manufacturers as the sector heads into the September-quarter earnings season, arguing that policy support, export growth and a still-heavy order pipeline should keep the long-term story intact. In a note cited by Business Today, the brokerage said the Ministry of Defence is working towards a capital outlay target of Rs 3 lakh crore by 2029, while approvals worth Rs 8 lakh crore over the past 18 months point to a larger wave of contracts ahead. It expects much of the pipeline, estimated at Rs 2 lakh crore to Rs 3 lakh crore, to convert into requests for proposals and signed orders over the next 12 to 18 months.
Against that backdrop, ICICI Securities named Hindustan Aeronautics, Bharat Electronics and Azad Engineering as its preferred picks, saying Indian original equipment makers with proven export records should benefit disproportionately as overseas demand strengthens, particularly in missiles, drones, aerospace systems, defence electronics and radar equipment. The brokerage also pointed to the wider geopolitical environment, including tensions in the Middle East, as a factor pushing up defence spending across the Gulf Co-operation Council region. According to the report, that should continue to support Indian suppliers with international ties or memorandums of understanding.
For the quarter ended September, the brokerage expects a mixed picture. It sees public sector undertakings delivering only muted revenue growth, generally ranging from flat to low double digits, while a few private companies could post much faster expansion on the back of execution catching up with order books. ICICI Securities singled out Zen Technologies, Solar Industries India and Azad Engineering as possible stand-outs, while saying Data Patterns could also report stronger earnings before interest, tax, depreciation and amortisation on the back of aerospace deliveries and demand in hydraulics. The note also suggested Bharat Electronics and Mishra Dhatu Nigam may show steady execution, although Hindustan Aeronautics could remain weighed down by a high base and continued delays in Tejas Mk-1A deliveries.
Other sector analysts have reached broadly similar conclusions. According to earlier market commentary from LiveMint, the defence trade has entered a phase where execution matters as much as winning fresh business, while Financial Express said order inflows among major capital goods companies rose in the latest quarter and highlighted Bharat Electronics, Bharat Dynamics and Data Patterns as firms that have secured significant contracts. Business Standard reported in June that ICICI Securities was already favouring defence names such as Hindustan Aeronautics, Solar Industries, Astra Microwave and Bharat Electronics, reinforcing the view that the sector’s appeal rests not only on near-term earnings, but on a multi-year expansion in domestic procurement, missile programmes, radar systems and naval platforms.
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