Defence Just Got a Shot in the Arm — Here Are Companies to Own

The Defence Acquisition Council has cleared a sweeping round of approvals covering missiles, strike aircraft, warships and anti-drone systems. Motilal Oswal says the sector remains a structural buy — and names its picks with price targets

Even as the broader Indian market grapples with an energy shock, rising inflation and earnings downgrades, one sector is moving in the opposite direction. India’s defence industry is receiving a relentless stream of government capital, and the latest round of approvals has only reinforced why analysts at Motilal Oswal believe the sector deserves a prominent place in any long-term wealth-building portfolio.

India’s Defence Acquisition Council has granted approvals for additional Acceptance of Necessity worth Rs 2.38 trillion, noted Motilal Oswal in a recent sector update. The approvals, the brokerage noted, “focus on enhancing surveillance, combat, and long range strike capabilities across the Army, Air Force, and Coast Guard.” Critically, the orders will be procured through a combination of imports and indigenisation, providing what Motilal Oswal called “a healthy addressable market for domestic players too.”

What Got Approved 

For the Army, the council cleared air defence tracked systems, armour-piercing tank ammunition, high-capacity radio relay systems, runway-independent aerial surveillance systems and 155mm Dhanush howitzer gun systems. For the Indian Air Force, approvals were granted for remotely piloted strike aircraft and the overhaul of Su-30 aero engine aggregates — a move Motilal Oswal noted will “increase the service life of IAF’s mainstay combat aircraft.” For the Indian Coast Guard, the DAC cleared heavy-duty air cushion vehicles for use in “multipurpose maritime coastal operational roles, including high-speed coastal patrolling, reconnaissance, search and rescue operations,” the report said.

Perhaps the most significant single approval is for medium transport aircraft — most probably 60 of them — to replace the IAF’s ageing AN-32 and IL-76 fleet. Motilal Oswal noted that “many international players can also bid for this contract,” making it one of the most competitively watched procurement decisions of the year.

The Beneficiaries

On Bharat Electronics, “BEL is well positioned to benefit in the near term,” Motilal said, citing two specific near-term catalysts. The Indian Navy’s next-generation corvette programme, which has received Cabinet Committee on Security approval and is estimated to be worth approximately Rs 400 billion for eight ships, will generate electronic suite and onboard defence system orders for BEL worth between Rs 120 billion and Rs 150 billion, expected to arrive in the first half of FY27. Separately, finalisation of a QRSAM order worth approximately Rs 300 billion is expected in early FY27. Motilal Oswal maintained its Buy rating on BEL with a target price of Rs 520, based on 45 times two-year forward earnings.

On HAL, the brokerage noted that deliveries of the indigenous Tejas Mark 1A fighter jet “are expected to begin early in FY27, following progress on key requirements laid out by the IAF.” These requirements — missile-firing trials, weapons systems certification and integration of the Israeli-origin radar with the aircraft’s indigenous electronic warfare suite — are expected to be completed by April 2026. The Ministry of Defence has also signed an award to HAL for six Advanced Light Helicopters Mk-III worth Rs 29 billion, while the Light Combat Helicopter Prachand programme, awarded to HAL for Rs 650 billion, has received CCS clearance. Motilal Oswal maintained its Buy on HAL with a target price of Rs 5,500.

On Bharat Dynamics, the note highlighted a significant milestone: BDL “has achieved a significant breakthrough by successfully localizing over 90% of the components for the Akash and Astra missile systems,” including the domestic manufacture of high-frequency seekers and dual-pulse solid rocket motors that were previously imported. Motilal Oswal said this “effectively shields India’s strategic missile inventory from global supply chain shocks” — a statement that carries particular weight given current Middle East disruptions. BDL is expecting inflows of nearly Rs 150 billion in FY27. The brokerage maintained its Buy on BDL with a target price of Rs 1,800.

On Astra Microwave, Motilal Oswal noted that the board has granted in-principle approval to demerge its space, meteorology and hydrology business into a separate entity, with completion expected by the first quarter of FY28. Post demerger, AMPL will “operate as a pure-play defense and aerospace company,” the report said, while the spun-off Astra Space Technologies will list independently on BSE and NSE with mirror shareholding. Motilal Oswal maintained its Buy on AMPL with a target price of Rs 1,150.