According to PL Capital Group's Research Analyst Amit Anwani, India's defence electronics segment is expected to lead the next phase of growth as increased research and development spending, modern warfare requirements and a strong order pipeline create new opportunities. The industry's focus is shifting from building manufacturing capacity to developing intellectual property (IP)-led technologies, with defence electronics, drones, unmanned aerial vehicles (UAVs) and missile systems attracting higher investment over the next few years. Anwani expects defence electronics to account for a larger share of future defence platforms as drones and guided missile systems require greater electronic components proportionately.
As reported by PL Capital, Bharat Electronics remains the preferred listed defence company under coverage, with the company's guidance for around 15% compounded annual growth rate (CAGR) in growth and a healthy order pipeline. Anwani cited the company's plans to sustainably increase R&D spending to develop products aligned with changing defence requirements. Additionally, he identified Solar Industries as an attractive play due to its exposure to defence consumables and unmanned systems, noting that electronics companies could benefit from export opportunities as global demand for drones, UAVs and missile-related systems increases. According to the analyst, IP-led businesses are likely to benefit more than companies focused only on manufacturing.
According to PL Capital's analysis, a defence and commercial shipbuilding pipeline exceeding ₹2 lakh crore is expected to support growth, particularly for defence public sector undertakings (DPSUs). Anwani highlighted strong order pipeline in shipbuilding, particularly for defence PSUs, with projects including landing platform docks (LPDs) and submarine programmes, along with incentives for commercial shipbuilding creating significant opportunities. The analyst noted that several private defence companies are also reporting strong export growth, although valuations across the sector remain elevated. He believes businesses capable of sustaining earnings growth through technology development and R&D investment can continue to justify premium valuations over the next two to three years.
According to reports from Kotak Institutional Equities, the brokerage's Defence Forum 2026 reinforced key themes including structural revenue visibility, IDDM-led indigenization tailwinds, rising export optionality and emerging high-volume verticals. The forum, which included plant visits and management interactions with MTAR Technologies, Zen Technologies, Astra Microwave and Raghu Vamsi Aerospace, highlighted a tangible 2-4-year demand pipeline backed by larger orderbooks and ongoing wallet-share gains with both DPSUs and global OEMs. As per Kotak, the Defence Acquisition Procedure (DAP) 2026's IDDM focus is a structural tailwind for the sector.
In morning trade, defence sector stocks showed mixed performance with Astra Microwave rising 1.7% to ₹1,757, Zen Technologies edging up 0.2% to ₹1,746.50, while MTAR Technologies slipped 1.1% to ₹7,493. According to Kotak, the brokerage noted that while clean energy remains the anchor business, data center racks (₹4-5 billion potential), civil nuclear and aerospace & defence emerge as new growth legs. The earlier decade was described as a decade of reform for the system integrators, with the next wave of growth expected to be driven by modern warfare technologies and higher government support for R&D. Anwani emphasized that the next wave of growth will be driven by modern warfare technologies and higher government support for R&D.
