Elara Capital has reiterated its optimistic stance on India’s defence sector, driven by a sharp rise in order flows expected in Q4FY25. Defence capex allocation for FY25 has been robust, with 75% of the total budget directed toward domestic companies. The Navy’s budget alone has seen an 18% YoY increase in FY25BE. Further bolstering the outlook, Hindustan Aeronautics Limited (HAL) is set to receive F-404 engines from General Electric by March 2025, resolving engine supply concerns.
Inflows for HAL are projected to reach an impressive ₹1.2 trillion in FY26E.
Elara has identified key picks within the sector, including HAL (Buy, TP ₹5,465), Bharat Electronics Limited (Buy, TP ₹345), Bharat Dynamics Limited (Accumulate, TP ₹1,300), and Garden Reach Shipbuilders & Engineers (Accumulate, TP ₹1,660). These companies stand out due to their strong order books, localization efforts, and modernization initiatives, which position them well to benefit from the government’s push for self-reliance in defence manufacturing.
