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Defence Sector: Large deals lined-up to get executed

ICICIdirect Research 16 Jan 2026 DISCLAIMER

Contracts awarding momentum has remained strong in defence sector as Rs 1.82 lakh crore worth of total contracts have already been given to industry players this year till Dec 2025. For full year, this number is likely to surpass Rs 2.07 lakh crore contracts achieved in FY25
The strong momentum in contracts awarding over the last 2 years (~Rs 4.2 lakh crore during FY25-FY26 vs Rs 3.6 lakh crore during FY20-24) is mainly driven by significant approvals clearance over the last 4 years (~Rs 12 lakh crore)
In the coming period, many big-ticket contracts are lined-up for awarding (including submarines, aircrafts, warships, missiles, aero-engines etc.
Deal for six new generation submarines under P-75I is in advanced stages of negotiation with German govt (estimated cost at ~₹70,000 crore). These will be manufactured by Mazagon Dock Shipbuilders in collaboration with German partner Thyssenkrupp.
Deal for 114 Multi-Role Fighter Aircrafts (MRFA) is also expected to be signed (possibly with Dassault Aviation of France) with an estimated cost of ~Rs 1.8 lakh crore. This project has also gained momentum considering that the IAF’s need to fulfil the shortfall in squadrons.
Two major aero-engines deals are also expected to be signed, one with GE for Tejas Mk2 aircrafts and one with Safran with AMCA aircrafts.
Apart from these, few key contracts like Quick Reaction Surface to Air Missile system (QRSAM) worth ~Rs 30,000 crore (to be signed with Bharat Electronics & Bharat Dynamics) and next-generation corvettes (NGC) worth ~Rs 36,000 crore (Garden Reach Shipbuilders is already declared L1 in NGC).
Some key missile system orders are also lined up for awarding in the coming period including Barak-8, Pinaka, Akash NG, BrahMos etc
Overall, defence sector is likely to see continued momentum in terms of orders awarding and pick-up in execution (led by increasing focus on indigenisation)
As the defence contracts exceeded Rs 2 lakh crore annually over the past two years and grew 40%+ CAGR over the past 3 years, capital outlay growth of just ~8% CAGR is creating a funding gap. As the order inflow outlook remains robust for coming years too, capital spending must accelerate to 15–20% CAGR, turning a period of under-allocation into a powerful growth trigger and giving the defence sector a clear, multi-year visibility tailwind
We remain positive on companies like Hindustan Aeronautics (TP: ₹ 5830), Bharat Electronics (TP: ₹ 495), Data Patterns (TP: ₹ 3560), Solar Industries (TP: ₹ 16700), Astra Microwave (TP: ₹ 1300)

View our research recommendation on Hindustan Aeronautics Ltd Also explore more on Research page

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