Trade Brains Smallcase Picks: 4 Defence Stocks to keep...

Synopsis: India’s defence sector is rapidly expanding, driven by indigenisation, rising exports, and strong policy support. The highlights 4 defence stocks benefiting from robust demand, government spending, and long-term growth in aerospace, electronics, and naval manufacturing.

India’s defence sector is experiencing strong growth, driven by rising strategic demand, expanding industrial capacity, and rapid indigenisation. By March 2025, 700 industrial licenses had been issued to 436 companies, reflecting increasing private sector participation. Defence exports have surged from Rs. 686 crore (US$ 81.1 million) in FY14 to Rs. 23,622 crore (US$ 2.8 billion) in FY25, while annual defence production reached a record Rs. 1,50,590 crore (US$ 17.57 billion), marking an 18% increase over FY24 and nearly 90% growth since FY20.

The country is also expanding into complex domains such as aircraft carriers and strengthening space-based surveillance by planning to deploy 52 satellites by CY30 to enhance real-time coordination and border monitoring across armed forces. Government policy continues to encourage private participation to deepen domestic manufacturing capacity.

Strong policy support and ecosystem development are further accelerating growth. The Union Budget for FY26 allocated Rs. 6,81,000 crore (US$ 78.7 billion), a 9.5% increase over FY25. Initiatives like the SRIJAN portal are promoting indigenisation, with over 34,000 items listed and 10,000 already indigenised. Defence Industrial Corridors in Uttar Pradesh and Tamil Nadu are fostering manufacturing clusters, while innovation programs under iDEX have signed 430 contracts involving startups and MSMEs. With Goldman Sachs projecting 32% EPS growth for private defence firms (FY25–FY28) and the domestic market expected to reach Rs. 10,00,000 crore (US$ 122 billion) in the next 20 years, the sector’s long-term outlook remains strong.

Defence Smallcase

This small case portfolio is focused on India’s push toward self-reliance in defence manufacturing. It combines well-established public sector companies known for stable earnings and regular dividends with nimble private players that are tapping into new growth opportunities. The portfolio covers a wide range of segments, including aerospace, shipbuilding, missiles, electronic warfare, and advanced defence technologies.

These companies typically have strong order pipelines, steady revenues backed by long-term contracts, and healthy cash flows. By spreading investments across different defence areas, the portfolio reduces risk while benefiting from multiple drivers of India’s ongoing defence modernisation. For more updates and insights, follow this smallcase.

Click the link below to explore this smallcase and discover curated investment opportunities in India’s growing Defence sector. https://tradebrainsportal.smallcase.com/smallcase/TDBNNM_0008

Bharat Electronics Ltd

Bharat Electronics Ltd (BEL) is a government-owned defence electronics company in India. It mainly develops advanced systems for the armed forces, including radars, communication equipment, electronic warfare systems, and missile support technologies. BEL plays a key role in India’s defence modernisation and benefits strongly from government defence spending and “Make in India” initiatives.

With a market capitalisaiton of Rs. 3,33,033 cr, the shares of Bharat Electronics Ltd closed at Rs. 455.60 per share, up from its previous close of Rs. 447.50 per share.

Sales of this company significantly increased from Rs. 5,792 cr in Q2FY26 to Rs. 7,154 cr in Q3FY26. Operating profit rose to Rs. 2,127 cr from Rs. 1,702 cr. Net profit also rose from Rs. 1,287 cr to Rs. 1,580 cr over the same period.

The company has shown consistent growth, with profit CAGRs of 16%, 24%, and 30% over 10, 5, and 3 years, respectively, while sales grew at 13%, 13%, and 16% over the same periods.

Paras Defence and Space Technologies Ltd

Paras Defence and Space Technologies is a private-sector company focused on niche defence and space engineering solutions. It specialises in optics, optronics, defence electronics, and space-related components. The company is known for supplying critical high-precision parts used in satellites, missiles, and surveillance systems, making it an important player in India’s growing defence-tech ecosystem.

With a market capitalisaiton of Rs. 6,262 cr, the shares of Paras Defence and Space Technologies Ltd closed at Rs. 777.05 per share, up from its previous close of Rs. 755.15 per share.

Sales of this company stood at Rs. 106 cr in Q3FY26. Operating profit fell to Rs. 26 cr from Rs. 30 cr. Net profit also fell from Rs. 19 cr to Rs. 17 cr over the same period. The company has delivered steady growth, with profit CAGRs of 26% and 32% over 5 and 3 years, respectively, while sales grew at 20% and 26% during the same periods.

Premier Explosives Ltd

Premier Explosives Limited manufactures explosives and propellants used in defence, mining, and space applications. It supplies products like solid propellants for rockets and missiles, as well as industrial explosives. The company works closely with organisations like DRDO and ISRO, giving it a strategic position in both defence and space supply chains.

With a market capitalisaiton of Rs. 2,665 cr, the shares of Premier Explosives Ltd closed at Rs. 495.80 per share, up from its previous close of Rs. 476.40 per share. Sales of this company increased from Rs. 75.58 cr in Q2FY26 to Rs. 81.41 cr in Q3FY26. Operating profit rose to Rs. 11.65 cr from Rs. 6.60 cr. Net profit fell from Rs. 17.87 cr to Rs. 6.04 cr over the same period.

The company has reported robust performance, with profit CAGRs of 18%, 38%, and 72% over 10, 5, and 3 years, respectively, while sales grew at 11%, 22%, and 28% during the same periods.

Mazagon Dock Shipbuilders Ltd

Mazagon Dock Shipbuilders Ltd (MDL) is a major government-owned shipyard that builds warships and submarines for the Indian Navy. It has been involved in key naval projects such as destroyers, frigates, and submarine programs. MDL is a crucial part of India’s naval defence capability and benefits from long-term government contracts and an increasing focus on indigenous shipbuilding.

With a market capitalisaiton of Rs. 1,03,426 cr, the shares of Mazagon Dock Shipbuilders Ltd closed at Rs. 2564 per share, up from its previous close of Rs. 2539.20 per share.

Sales of this company significantly increased from Rs. 2,929 cr in Q2FY26 to Rs. 3,601 cr in Q3FY26. Operating profit rose to Rs. 887 cr from Rs. 695 cr. Net profit also rose from Rs. 749 cr to Rs. 880 cr over the same period.

The company has delivered strong growth, with profit CAGRs of 17%, 38%, and 57% over 10, 5, and 3 years, respectively, while sales grew at 12%, 18%, and 26% over the same periods.

Keep following Smallcase for the latest portfolio updates, thematic shifts, and rebalancing ideas, as it frequently updates its investment baskets based on evolving market trends, research insights, and sector developments.

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