Defence Sector Set For Major Boost With Rs 1 Lakh Crore Spending Push, Says This Analyst

The Indian defence sector will see a surge in activity over the next three months, with the government aiming to exhaust the allocated budget of Rs 1.72 lakh crore.

"The next three months will be cautious, as we're going to see incremental spending of close to around Rs 1 lakh crore," said Harshit Kapadia, vice president of consumer durable and electrical and capital goods at Elara Capital, while speaking with NDTV Profit on Thursday.

Kapadia noted that a scenario similar to the Rs 60,000 crore single-day order outflow seen two years ago from the Ministry of Defence could repeat. "We could have a similar repeat or it could be staggered across the next three months," he added. Big-ticket imports like the Rafale-M from France and the MQ-9V drones from the US remain on the radar, alongside a robust pipeline of domestically manufactured equipment.

If one look at the allocation of the government spending towards the defence sector, "almost 75% has been allocated to domestic companies", Kapadia highlighted. Companies such as Paras Defence and Space Technologies Ltd. are expected to be key beneficiaries once the Ministry of Defence accelerates the orders.

On India's growing defence export market, Kapadia said, "Private sector participation has increased to close to 70% of overall exports, and this is one area we're very positive about." He explained that Indian firms are well-positioned to offer defence products at competitive prices amid ongoing global geopolitical tensions. 

Looking ahead, India has an anticipated defence pipeline worth Rs 15 lakh crore over the next decade, including major projects such as the Rs 6,700-crore Light Combat Aircraft Tejas program, the Rs 15,000-crore Quick Reaction Surface-to-Air Missile system, and the Rs 36,000-crore Next-Generation Corvette initiative.

Kapadia expects order flows to gain momentum from the fourth quarter onwards. Hindustan Aeronautics Ltd. is set to emerge as the largest beneficiary of the LCA Tejas project, followed by Bharat Electronics Ltd., Larsen & Toubro Ltd., Data Patterns (India) Ltd. and Astra Microwave Products Ltd., he said.