Paras Defence and Space Technologies is increasing its focus on space optics as it seeks to improve margins and build long-term growth, even as defence engineering continues to lead near-term revenue.
The company's revenue mix still reflects faster execution in defence engineering, but its order book shows a shift towards optics-led programmes with longer timelines. This divergence points to where future growth is likely to come from.
The company operates across two segments—Optics and Optronics Systems, and Defence Engineering. In 9MFY26, optics contributed 46% of revenue while defence engineering accounted for 54%, compared with a 49%-51% split in FY25.
However, the order book tells a different story. In FY25, defence engineering made up 51% of revenue but only 40% of the order book. Optics contributed 49% of revenue but formed 60% of the order book, indicating a shift in future execution.
Optics-Led Growth
Paras designs and manufactures optical systems for defence and space applications, including hyperspectral cameras, telescopes for space debris tracking, surveillance payloads and large space mirrors. It also manufactures electro-optical systems through a joint venture with Israel-based Controp Precision.
The company said it is the only Indian firm with the capability to design, manufacture, integrate, test and space-qualify optical systems for space programmes. It is also the only company in the Asia-Pacific region that develops and manufactures submarine optronic periscopes.
Defence engineering remains focused on mechanical systems, defence electronics and structural assemblies. Paras supplies subsystems for missile programmes such as Brahmos, Akash, Astra and Agni, and supports naval and armoured platforms including submarine systems and tank electronics.
Margin Divergence
The difference between the two segments is reflected in profitability. Defence engineering operates at EBITDA margins of about 22%, while optics and optronics deliver margins of around 54%.
This gap is shaping the company's strategy. Management aims to increase the share of optics in total revenue to about 65% by FY29. If achieved, consolidated EBITDA margins could exceed 28% over time.
Export Push
India remains the main market, accounting for 85% of revenue in FY25, with exports contributing 15%. Export share has risen from 11% in FY21 to 14% in FY24.
Paras is expanding partnerships to grow exports. Its collaboration with Controp Precision is aimed at accessing global markets with established technologies.
Order Pipeline
The company estimates an opportunity pipeline of Rs 14,000 crore over the next five years. In optics, it is moving towards higher-value products. It currently produces one periscope every three months at about Rs 30 crore per unit.
From Q4FY26, it plans to supply more advanced periscopes priced at around Rs 50 crore each. It aims to scale output to six periscopes annually by FY28, aligned with Indian Navy programmes including P-75 and P-75(I).
In defence engineering, Paras is expanding into aerospace by supplying avionics for the Saras MK-II aircraft, where demand could exceed 130 aircraft over the next five to seven years. It is also working on air refuelling systems.
New Segments
Paras is investing in anti-drone systems, targeting an opportunity of Rs 2,000 crore. Through its subsidiary, Paras Anti-Drone Technologies, it is developing laser-based directed energy systems expected to be deployed as early as next year.
It is also working on drone technologies through a collaboration with Israel-based MicroCon Vision, focusing on drone cameras and hydrogen-powered drones for long-duration use.
Satellite Opportunity
In the space segment, Paras is developing a new space camera with Controp and building surveillance systems and telescopes. A key opportunity has emerged after the government cleared the launch of 52 satellites with a total outlay of Rs 27,000 crore.
The company has also secured four iDEX contracts, expanding its access to global opportunities. Its broader pipeline includes opportunities in satellite ground stations, radar systems and anti-jamming technologies.
Financials
For 9MFY26, Paras reported revenue of Rs 305 crore, up 18.7% year-on-year. Operating profit rose 13% to Rs 78 crore, while margin declined by 130 basis points to 25.6% due to a higher share of defence engineering.
Net profit increased 22% to Rs 50 crore. The order book stood at Rs 950 crore as of December 2025, with optics and optronics contributing 53%, defence engineering 37%, and the rest from anti-drone systems.
Return on equity stood at 11.7% and return on capital employed at 13.3%.
Valuation
At Rs 626 per share, Paras trades at 69 times earnings. This is comparable with Data Patterns at 71 times, Bharat Dynamics at 72 times and Apollo Micro Systems at 76 times, while higher than Zen Technologies at 47 times and Astra Microwave at 52 times.
The valuation reflects expectations of growth driven by a shift towards higher-margin optics. The pace of this transition remains the key factor for future earnings.
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