India's rapidly expanding defence procurement programme has placed a number of defence-sector stocks firmly in the spotlight. With the government looking to improve the country’s missile, air-defence and indigenous weapons capabilities, defence electronics, guided missiles and critical weapon subsystems could find significant business opportunities.
The focus intensified after the Defence Acquisition Council approved defence procurement proposals worth around Rs 2.38 lakh crore in March 2026. Then, additional procurement packages worth about Rs 52,000 crore were approved, including important systems such as Medium Range Surface-to-Air Missiles (MRSAM), Very Short Range Air Defence Systems (VSHORADS) and Man-Portable Anti-Tank Guided Missile (MPATGM).
The scale of these programmes has increased investor interest in companies in India's defence manufacturing ecosystem. Bharat Electronics (BEL), Bharat Dynamics (BDL) and Apollo Micro Systems are some of the companies that attract attention because of missile programmes and defence electronics.
But good order prospects do not necessarily translate into good stock returns. Valuations, execution capabilities, cash flows, margins, and future order inflows are the top things investors need to take into account.
Bharat Electronics: Defence Electronics Leader
Bharat Electronics, commonly known as BEL, is one of the leading defence electronics companies in India. Defence accounts for approximately 88% of the company’s total revenue, and 84% of indigenous products are reported to be part of the firm's revenue.
BEL manufactures and supplies critical electronic systems used across various defence platforms, including radars, seekers, control centres and missile subsystems. Through programs like QRSAM, Long Range Surface-to-Air Missile systems, Project Kusha and Akash, the company is aware of the growing requirements of India's air defence.
The QRSAM programme could be an opportunity of around Rs 30,000 crore for BEL. The company has an order book of around Rs 72,258 crore, with defence accounting for nearly 90% of that order book.
BEL is also targeting order inflows of more than Rs 55,000 crore in FY27, which could help to provide further visibility of future revenue.
BEL's ROCE is 49.4%, and ROE is 36.4%, which is in line with its performance on a profit basis. Its valuation, by contrast, is low compared to the three-year average valuation.
Bharat Dynamics: Direct Exposure To Missile Manufacturing
Bharat Dynamics is another important defence stock to watch because it has direct exposure to guided missiles and weapon systems.
The company has an order book of around Rs 26,500 crore, which is about 9.6 times its trailing 12 months revenue. Such a large order pipeline offers good revenue visibility, but execution is still critical.
BDL is also expected to increase production as soon as it gets approval to bulk manufacture the Improved Akash Weapon System. Other important programmes, like Astra Mk-I and Amogha-III, could also contribute to its future business prospects.
The company is working with Rafael on the Spike LR2 missile and has set up a production line for the system. BDL has secured new orders of around Rs 5,400 crore for anti-tank and air-defence missile systems in FY26.
The future might also be inspired by programmes like Helina and Dhruvastra to strengthen the company's position in India's indigenous missile manufacturing ecosystem.
Apollo Micro Systems: Critical Missile Subsystems
Apollo Micro Systems is further down the defence manufacturing value chain, providing critical electronic and technical subsystems used in missiles and other weapons systems.
The company has exposure to programmes such as Akash, QRSAM, Project Kusha and BrahMos, as well as anti-tank and air-to-surface missile programmes.
Apollo Micro Systems manufactures a number of critical subsystems for the QRSAM programme, including guidance systems, onboard computers and actuation systems.
Its acquisition of Premier Explosives has also helped to further strengthen its position in the missile and guided weapons space. The overall order book of the company was about Rs 1,704 crore as of 31st March, the information stated.
Apollo Micro Systems has an ambitious target of 40–45% revenue growth and plans to enlarge its operations significantly, with the aim of 12 times more capacity by March 2027.
Defence stocks: opportunity comes with risk
India’s increasing defence spending and increasing domestic manufacturing could create long-term opportunities for defence companies. Large procurement programmes can provide manufacturers with multi-year order visibility and support capacity expansion.
But investors should not make decisions solely on the basis of order books or government procurement announcements. Order execution, margins, working capital, cash flows, debt, return ratios and valuations can all significantly impact the performance of individual companies.
Some defence stocks are already trading at premium valuations, which means future growth expectations may already be reflected in their share prices. Any delay in order execution or changes in procurement schedules could also impact investor sentiment.
The defence industry is still very important in India, and companies like BEL, BDL and Apollo Micro Systems are located in different parts of the missile and defence electronics supply chain. Their future performance will be affected by the government’s procurement moves, as well as how effectively they convert orders into revenue and profit.
Investors should conduct detailed research and assess their individual risk appetite before investing in defence stocks. Consulting a qualified investment adviser is advisable before making any investment decision.
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