The defence sector in India is poised for a significant recovery following a period of slower order inflows in the first half of FY25. This resurgence is primarily driven by a major Acceptance of Necessity (AoN) accorded by the Defence Acquisition Council (DAC), valued at approximately ₹22,000 crore. The AoN encompasses various crucial projects, including shipbuilding, helicopters, electronic warfare systems for Sukhoi-30 aircraft, and overhauls of tanks and fighter aircraft engines, as reported by Elara Securities. With expectations for more robust order inflows in the second half of FY25, the sector is anticipated to witness substantial capital acquisitions.
The DAC has approved the procurement of 31 new waterjet fast attack craft (NWJFAC) at an estimated cost of ₹1,700 crore and 120 fast interceptor craft worth ₹3,000 crore. These contracts are expected to be awarded to established shipbuilders such as Cochin Shipyard (CSL), GRSE, Goa Shipyard, Hindustan Shipyard, and L&T, all of which have the necessary manufacturing capabilities. In addition to these orders, several private ancillary firms may also secure component contracts.
Furthermore, six advanced light helicopters (ALH) for the Indian Coast Guard will be procured from Hindustan Aeronautics Limited (HAL) at a cost of ₹900 crore. The electronic warfare suite for Su-30 MKI aircraft is valued at ₹4,000 crore and will involve collaboration with Bharat Electronics Limited (BEL) and private companies like Data Patterns and Astra Microwave.
The AoN also includes overhauls for T-72 and T-90 tanks, estimated between ₹5,000-6,000 crore, as well as a ₹2,000-3,000 crore overhaul for BMP tanks. Key beneficiaries of these projects are expected to include BEML, Bharat Forge, and Armoured Vehicle Nigam. Additionally, the overhaul of Sukhoi-30 fighter engines is projected to be valued at ₹2,000-3,000 crore and will be managed through HAL.
Despite the fact that the year-to-date AoN for FY25 has reached only 39% of the FY24 AoN value of ₹42,000 crore, a significant uptick in order inflows is anticipated in the latter half of FY25. The pipeline for upcoming large orders includes proposals for advanced land navigation systems, combat vehicles, offshore patrol vessels, and air defence equipment.
India’s defence sector benefits from a robust order pipeline totaling ₹1.60 lakh crore. This growth is bolstered by increasing export demand amid global conflicts and a heightened focus on national security. Defence Public Sector Units (DPSUs) are expected to receive ongoing support while private sector participation in defence manufacturing is projected to expand significantly.
In conclusion, the Indian defence sector is gearing up for a transformative phase characterized by increased capital acquisitions and enhanced domestic manufacturing capabilities. This aligns with India’s strategic goals of becoming self-reliant in defence production while fostering innovation and technological advancements within the industry.
