From FY24E to FY30E, domestic defence spending is expected to double, a development that would likely change the face of India’s defence industry.

A report published by Jefferies states that the industry expects a noticeable 13 per cent industry Compound Annual Growth Rate (CAGR) from FY23 to FY30, with an anticipated domestic defence opportunity of between USD 100 and USD 120 billion over the next five to six years.

Despite being one of the top three countries in the world for defence spending, India’s defence spending in Calendar Year 2022 (CY22) was only 10% of what the US and China spent.

Despite this, India’s land size and coastline are almost identical to those of the US and China, demonstrating the significant potential for development and investment in

Additionally, it is anticipated that export defence prospects will grow at a noteworthy 21 percent compound annual growth rate (CAGR) from FY23 to FY30. In FY17 to FY24E, India’s defence exports increased 16 times, reaching USD 3 billion.

Forecasts indicate that this amount may rise to USD 7 billion by FY30E, in line with the government’s goal of USD 6 billion by FY29E.

Leading the way in the industry, Data Patterns has in-house technology and a projected 30 percent+ compound annual growth rate for earnings per share (EPS).

The company’s revenues are expected to climb by about five times between FY24E and FY30E, thanks to export growth and steps towards indigenization.

Similarly, HAL, which is well-known for combining consistent service revenue growth with OEM (Original Equipment Manufacturer) manufacturing expansion, predicts a medium-term

As the industry leader in home defence electronics, Bharat Electronics (BEL) is well-positioned to benefit from the stable trajectory of defence spending.

BEL stands to gain a great deal from the defence opportunity, since the navy and army account for 70–75 per cent of its earnings, with the air force providing the remaining portion.

The company’s comfortable working capital position and debt-free status strengthen its standing in the market.

The industry’s stock markets are expected to see increases in response to this rise in spending.

With a Buy recommendation, Jefferies has started covering important companies like Hindustan Aeronautics (HAL) and Data Patterns.

The company also continues to have optimistic views on Bharat Electronics (BEL).

India’s defence exports reached a record ₹21,083 crore in the fiscal year 2023–24, up 32.5% over the previous year’s amount of ₹15,920 crore.

These figures, which were released in a press release by the Ministry of Defence on Monday, highlight a notable upward trend in defence exports, which have increased by 31 times in the last ten years as compared to 2013–14.

Defence Public Sector Undertakings (DPSUs) and the private sector working together is responsible for the strong performance in defence exports.

Remarkably, DPSUs accounted for 40% of the overall exports, with the private sector contributing about 60% of the total.

Additionally, there was a significant increase in the quantity of export permits granted to defence exporters in 2023–2024.

Rising international geopolitical tensions and India’s unwavering focus on becoming self-sufficient have created a favourable environment for domestic defence businesses’ order flow and revenue development.

Furthermore, the sector’s prospects are further buoyed by the Indian government’s coordinated efforts to strengthen export-oriented country-to-country relations.

Notwithstanding these expectations, the industry is nevertheless vulnerable to issues including managerial bandwidth limitations and technological obsolescence.

But with wise policies and strong government backing, India’s military industry seems set to grow at an exponential rate in the next years, propelling both strategic and economic developments.