- Apollo Micro Systems' share price rose 135% over the past year, driven by strong earnings
- The company acquired IDL Explosives, adding explosives manufacturing to its defence portfolio
- AMS plans to expand into land-based defence systems and received a lifetime weapons licence
Apollo Micro Systems Ltd. has emerged as one of the top-performing defence stocks over the past year, with its share price rising 135%. More than a third of those gains came in 2026 as investors responded to strong earnings, new manufacturing capabilities, the acquisition of IDL Explosives and a lifetime weapons and ammunition licence.
The rally comes as India pushes to expand domestic defence manufacturing under the Atmanirbhar Bharat programme. The government aims to raise the private sector's share of defence production to at least 50% from about 30% currently, while increasing total defence production to Rs 3 lakh crore by 2029 from Rs 1.5 lakh crore in FY26.
Shift To Platform Manufacturing
Apollo Micro Systems, or AMS, supplies electronic systems, sensors and subsystems used in defence equipment including submarines, drones and missiles. The company works with organisations such as GRSE, Bharat Dynamics and Bharat Electronics.
A key part of its growth strategy is moving from supplying components to manufacturing complete defence platforms under its own brand. AMS has supported this transition through research and development spending, allocating about 8% of revenue to the area.
Building An Integrated Defence Business
The company's expansion into land-based defence systems forms part of a broader plan to strengthen its presence across air, maritime and land platforms.
AMS took a significant step in 2025 when it acquired IDL Explosives from the Hinduja Group. The acquisition added explosives manufacturing capabilities to a business that previously focused on electronics and defence hardware.
Before the acquisition, AMS relied on third parties for explosive filling in ammunition and weapon systems. The addition of IDL allows the company to combine its electronic systems with explosives used in artillery shells, missiles and mines.
IDL holds licensed capacity of 500 metric tonnes per annum for TNT and 50 metric tonnes per annum for HMX. It has also received an industrial licence for RDX. AMS expects these capabilities to meet its current internal requirements.
The company also sees scope for expansion. Only about 40% of IDL's land bank is currently in use, leaving room to add capacity as AMS works towards becoming a fully integrated defence manufacturer.
New Products And Licence Expansion
AMS plans to enter additional land-based defence segments from FY27. The company intends to target armament electronics, fire-control systems for battle tanks, infantry combat vehicles and artillery platforms. Trials for vehicle-mounted counter-drone systems are also scheduled for the first quarter of FY27.
The Department for Promotion of Industry and Internal Trade recently granted AMS a lifetime licence for weapons and ammunition manufacturing. The licence permits the company to produce missiles, radars, rockets, loitering munitions, torpedoes, underwater mines and unmanned aerial vehicles.
AMS said it is the only Indian company with a portfolio covering shallow-water, deep-water and limpet underwater mines. Management estimates the immediate domestic market for these products at between Rs 4,000 crore and Rs 4,500 crore.
Capacity Expansion Plans
AMS is investing Rs 300 crore to increase manufacturing capacity to 12 times current levels through greenfield and brownfield projects.
The planned facility will support manufacturing, assembly, integration and testing of heavy weapon systems. The company expects the investment to reduce dependence on external facilities and support future growth.
Management said AMS could sustain or exceed the 61% revenue growth it recorded in FY26. The company reported an order book of Rs 1,432 crore as of March 2026, its highest on record.
AMS expects indigenous defence programmes to move into mass production in FY27, creating opportunities for additional orders. The company also expects orders for underwater mines and fully filled ammunition, with AMS supplying electronic systems and IDL providing explosive filling.
Management also sees opportunities in export markets as global defence supply chains face disruption. IDL has already secured an export order worth Rs 1.5 crore for cartridge explosives, and AMS plans to expand its international presence.
Strong Financial Performance
AMS reported revenue of Rs 904 crore in FY26, up 61% from a year earlier. EBITDA increased 69% to Rs 218 crore, while margin expanded by 114 basis points to 24.1%.
Net profit rose 91% to Rs 107 crore. Return on capital employed improved to 18% in FY26 from 10% in FY21, while return on equity stood at 11.21%.
The company also plans to reduce promoter share pledges from about 39% to zero by FY27 as part of efforts to strengthen its balance sheet.
Valuation Remains A Key Question
Despite the growth outlook, AMS trades at a price-to-earnings multiple of 132 times, compared with an industry median of 58 times.
The company's ability to justify that valuation will depend on execution. AMS must deliver on capacity expansion plans, integrate IDL successfully and convert opportunities into orders. While the company has broadened its product portfolio and expanded its order book, sustaining growth at a larger scale will be critical to supporting current market expectations.
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