CRISIL Ratings predicts a 20% revenue growth for top 25 private aerospace and defence companies in India for the fiscal year 2024-25. Moreover, the revenue may reach approximately ₹13,500 crore in addition.
This growth is attributed to increased government spending and efforts to encourage private participation in the defence sector.
The order book to operating income ratio is expected to improve to around 4.5 times in fiscal 2025, reaching ₹50,000-51,000 crore. Operating margin is likely to increase by 50-60 basis points due to sustained revenue growth, economies of scale, and better fixed cost absorption.
The strong revenue growth and order inflow are expected to lead to higher working capital requirements for private defence companies.
The Strong Government Impetus:
The various initiatives and policies implemented by the Indian government to boost the domestic defence sector and reduce reliance on imports. Furthermore, these measures are aimed at encouraging private participation. With fostering innovation, and creating a self-reliant defense ecosystem too.
Some of the key government initiatives that are driving the growth of private defence companies include:
- Atmanirbhar Bharat Abhiyan (Self-Reliant India Initiative)
- Defence Acquisition Procedure (DAP) 2020
- Defence Production and Export Promotion Policy (DPEPP) 2020
- iDEX (Innovations for Defence Excellence)
The government has steadily increased the defense budget. Also allocating more funds for procurement and research and development too, which benefits both public and private defense companies.
These initiatives have created a favorable environment for private defense companies in India. Further, that leads to increased order inflows, higher revenue growth, and improved profitability.
Finally, CRISIL’s outlook for private defence companies in India is positive. With robust growth expected in the coming fiscal year. Meanwhile, companies will need to manage their working capital effectively to sustain this growth trajectory. The government’s continued focus on self-reliance and indigenization is expected to further drive the growth of the private defense sector in coming years.