India's defence sector holds prospect of USD 138 billion from FY24 to FY32

According to the report, India's defence capital expenditure is set to be close to 37 percent of the total budget by FY30, reported ANI.

This would be a marked rise from the 29 percent pegged for FY25 and equates to a total capital outlay of Rs 15.5 trillion over FY24-30, representing significant growth compared to previous periods.

"India's government is actively supporting the defence sector through favourable policy reforms, incentives, and initiatives to promote indigenous manufacturing and technology development. We expect the share of defence capital outlay to increase to 37% of total defence budget in FY30 (FY24RE: 26 per cent). This implies cumulative capital outlay of USD186bn over FY24-30 (vs cumulative FY18-24F: USD93bn)," said the report, according to the report.

This growth is owing to escalating defence budgets, modernization initiatives, and the government's emphasis on indigenous manufacturing through programs like "Make in India."

According to the report, the defence sector offers promising prospects across various segments.

The defence Aerospace sector alone presents a significant opportunity, amounting to USD 50 billion, the report said.

This covers investments in aircraft, helicopters, unmanned aerial vehicles (UAVs), avionics, and related systems.

Defence Shipbuilding is another key area, with a potential of USD 38 billion for naval vessels, submarines, patrol boats, and support ships to strengthen maritime security.

Investments in Missiles/Artillery/Gun Systems are projected to reach USD 21 billion, in line with India's efforts to enhance its artillery and missile capabilities. Additionally, the report highlights substantial growth in defence exports, totalling USD 29 billion, with momentum expected to continue, according to the report.

The report highlights the potential upside for shares of Hindustan Aeronautics (HAL) at 28 percent, attributed to its strong position in fighter aircraft and helicopters, as well as significant capability upgrades supporting the development of an indigenous engine program.

Bharat Electronics is also noted with a potential upside of 32 percent, driven by increased visibility in order inflows, confidence in margin delivery, and expansion in returns ratios.

Over the past year, HAL shares have surged by 156 percent to Rs 3877, while Bharat Electronics shares have risen by 109 percent to Rs 227.

This growth reflects investor confidence in these companies amidst supportive government policies and initiatives aimed at bolstering indigenous manufacturing and technology development in the defence sector.

The Indian government's active support for the defence industry through policy reforms and incentives fosters a favourable environment for companies operating in this sector.

Moreover, there is a growing emphasis on expanding the global presence of India's defence industry through exports, technology transfer, and collaboration.

Companies specializing in defence manufacturing and technology development are well-positioned to leverage export opportunities, diversify revenue streams, and broaden their market reach, as highlighted in the report.