According to CRISIL Ratings, India’s private defense companies are expected to rise by 16–18% in FY2026, setting them up for another successful year of growth. This expansion builds upon a roughly 20% compound annual growth rate (CAGR) during FY2022–2025, highlighting consistent momentum primarily driven by favorable government policies, robust domestic demand, and growing private involvement in defense R&D and manufacturing.
Domestic manufacturing and indigenization have been greatly aided by government programs including the Emergency Procurement Plan, Atmanirbhar Bharat, the Defence Acquisition Policy (DAP), and the Defence Production and Export Promotion Strategy (DPEPP).
These actions, along with increased military spending in the face of geopolitical unpredictability, have made it easier for private companies to increase their capabilities and land bigger contracts.
With equity investments of ₹3,600 crore over the last three fiscal years and a net worth base of ₹4,760 crore in FY2022, private defense companies have shown a strong commitment to long-term growth. R&D, innovation, and CAPEX have received a large amount of this financing, bolstering technological capabilities in fields like electronic warfare, aerospace systems, and C4 (command, control, communications, computers, and intelligence). Due to the high capital intensity of the industry, almost one-third of the funds have been allocated to working capital needs.
By the end of FY2026, the order book value of private defense industries is expected to have increased from ₹40,000 crore in FY2025 to ₹55,000 crore. The need for C4ISR solutions, electronic warfare systems, and aerospace parts and equipment is driving the expansion. Operating margins should remain stable at about 18–19% due to robust revenue streams and contracts with built-in price escalation clauses, guaranteeing profitability even with significant capital investment.
Due to previous equity infusions, IPO-driven funding, and private equity participation, balance sheets are nonetheless healthy despite the capital intensity of the sector, according to CRISIL. Companies are anticipated to invest ₹1,000 crore in CAPEX and additional working capital for FY2026.
To keep debt levels under control, the majority of these expenses will be paid for internally. As of March 31, 2026, the TOL/TNW ratio is expected to remain steady at 1.15 times, with interest coverage forecast at 5.5 times. This indicates a good ability to repay debt and a resilient financial position.
As a result of robust revenue growth and protective contractual provisions, profitability is anticipated to stay steady, with operating margins in the 18–19% range. Even when businesses invest heavily in modernization, they avoid overleveraging by striking a balance between revenue visibility and innovation-driven growth.
India’s defense industry is still dominated by state sector projects, although private businesses are gradually gaining market share. With the help of both direct domestic procurement orders and exporting opportunities, their portion of industry revenue is increasing. Private companies are becoming more involved in the defense ecosystem as a result of the government’s quest for independence, which is opening up long-term structural growth prospects.
But there are still dangers ahead, analysts warn. Growth trajectory may be hampered by protracted working capital cycles, policy changes, and disruptions in the semiconductor supply chain. Demand trends will also be impacted by global defense procurement cycles and geopolitical changes. In the short term, these risks are lessened by the industry’s solid order book, growing technological capabilities, and sound financial standing.
With growing capabilities in aerospace, electronics, and systems integration complementing India’s strategic drive for indigenization and export-led defense expansion, the private defense sector in India is well-positioned to sustain double-digit growth. Private defense companies are becoming a more important part of India’s defense industrial base because to robust order pipelines, ongoing government assistance, and effective capital management.
