|
|
by IANS |
New Delhi, June 18 (IANS) Entities operating in the Indian defence sector are expected to sustain robust growth momentum, with likely revenue expansion of 15-17 per cent in FY26, a report showed on Wednesday.
The healthy revenue growth is primarily driven by strong execution progress on the back of a robust order book position, with order book/operating income (OB/OI) ratio at 4.4 times as of FY25 end, according to an ICRA analysis.
Over the years, the government has implemented numerous policy initiatives, with ‘Atmanirbhar Bharat’ at its core, to enhance domestic defence production capabilities, encourage investments and expand exports.
These include the liberalisation of FDI policies in the defence sector, continuation of the defence offset policy, establishment of two Defence Industrial Corridors and a sustained push towards indigenisation through the notification of five ‘Positive Indigenisation Lists’ and the online indigenisation portal ‘SRIJAN’.
“These apart, the government has also increased the budgetary outlay for the sector with a thrust towards capital outlay, which has grown at a CAGR of 8.29 per cent over the previous five years to Rs 1.92 lakh crore in FY2026 budget estimates (BE),” the report mentioned.
Through these initiatives, the expenditure on defence procurement from domestic vendors has increased from 61 per cent in FY2017 to about 75 per cent in FY2025, while exports have grown by more than 15 times and at a healthy CAGR of 41 per cent to Rs 23,622 crore during FY2017-FY2025 period.
“Entities across the entire spectrum of defence production – land, naval, aeronautical, armaments and ammunition and ICT2 – will benefit from the sustained expansion in budgetary outlay since 2015, which is expected to translate into healthy order inflows as the government continues to increase domestic procurement,” said Suprio Banerjee, Vice President and Co-Group Head, Corporate Ratings, ICRA.
The weighted average operating margins are expected to remain healthy at 25-27 per cent for FY2026, supported by economies of scale, rising localisation, with entities beginning to undertake the production of more value-accretive system-level products, compared to the earlier sub-component/assemblies manufacturing, Banerjee explained.
While the land and ICT-based segments are expected to see increased private sector participation, the defence public sector undertakings (DPSUs) continue their dominance in the naval, aerospace and armaments segments.
Latest News
