Aerospace & Defence Sector Analysis: Q2 & H1 Fy26 Insights

The Indian Aerospace & Defence (A&D) sector is currently experiencing a transformative phase, driven by robust government support for indigenization, increased defense budgets, and a heightened focus on national security amidst evolving geopolitical landscapes. The extracted data from Solar Industries India Limited, Mazagon Dock Shipbuilders Limited, Garden Reach Shipbuilders & Engineers Ltd., Zen Technologies Limited, Rossell Techsys Limited, and Krishna Defence and Allied Industries Limited for Q2 and H1 FY26 paints a picture of dynamic growth, strategic diversification, and significant investment in capacity and technology. While some companies demonstrate exceptional revenue and profit growth, others are navigating temporary revenue dips due to the lumpy nature of defense orders, yet all share an optimistic long-term outlook fueled by a strong order pipeline and strategic initiatives. The sector is characterized by a strong push for 'Make in India' and 'Raksha Atmanirbharta' (Self-reliance in defence production), leading to increased domestic manufacturing, R&D, and export potential.

A. Industry Overview & Market Landscape

The Aerospace & Defence sector in India is undergoing a significant transformation, marked by ambitious government initiatives, substantial budget allocations, and a strategic shift towards self-reliance and export capabilities. The market landscape is diverse, encompassing various segments from shipbuilding and ammunition to advanced electronics, simulation, and aerospace components.

1. Total Addressable Market Size and Growth Rates: The overall market is experiencing robust expansion, primarily driven by the Indian government's aggressive defense modernization plans and increasing geopolitical tensions globally.

• Defence Acquisitions: DAC-approved defence acquisitions from FY22–25 totaled INR 8.45 trillion, representing a 3.3x increase over the preceding three years, indicating a substantial and accelerating demand pipeline.
• Defence Budget: The Defence Budget for FY26 was raised to INR 6.81 trillion, marking a 9.5% year-on-year (YoY) increase. An additional ₹50,000 crore is expected to be allocated to the defense budget, further underscoring the government's commitment.
• Defence Production & Exports: FY24 saw defence production surge by 16.7%, while defence exports grew by 32.5% YoY, reaching over 85 countries. Projections indicate defence exports could reach INR 50,000 crore (US$ 5.8 billion) by FY29, positioning India among the top 25 arms exporting nations in 2024.
• Naval Expansion: The Indian Navy aims to become one of the top 5 shipbuilding nations and a ship repair hub within the next decade, targeting a fleet of 175-200 warships by 2035, up from the current 132. This translates to an estimated INR ~2 Lakh Crore in orders for 68 warships and vessels currently on order.
• Mega Shipbuilding Orders: Mega shipbuilding orders worth INR 2.35 trillion are expected in FY26-27, representing a 3.1x increase over the current order book of listed defense shipyards. This highlights a massive upcoming opportunity for shipbuilders like Mazagon Dock Shipbuilders (MDL) and Garden Reach Shipbuilders & Engineers (GRSE).
• Autonomous Systems: The Indian Navy has allocated approximately $1 billion towards autonomous underwater vehicles (AUVs), indicating a significant emerging market for advanced defense electronics and platforms.

2. Market Structure and Segmentation: The sector is segmented by product, geography, and customer type, with companies often diversifying to de-risk and capture broader opportunities.

• By Product:
  • Ammunition & Explosives: Solar Industries India Limited is a key player, manufacturing industrial explosives and propellants, with a strong focus on defense applications like Pinaka rockets, 155 mm shells, and loitering ammunition (Nagastra). They also focus on energetic materials.
  • Shipbuilding & Repair: Mazagon Dock Shipbuilders Limited (MDL) and Garden Reach Shipbuilders & Engineers Ltd. (GRSE) are the primary public sector shipyards, specializing in destroyers, frigates, submarines, and various patrol/survey vessels. Krishna Defence and Allied Industries Limited supplies critical components like special steel sections (bulb bars) and weld consumables for shipbuilding.
  • Training & Simulation: Zen Technologies Limited is a leader in advanced military training simulators for Army, Navy, and Air Force, offering comprehensive solutions.
  • Anti-Drone Systems: Zen Technologies is also a prominent player in indigenous anti-drone systems, offering both soft-kill and hard-kill solutions. Solar Industries is also developing hard kill solutions for anti-drone.
  • Aerospace & Defence Components/Engineering: Rossell Techsys Limited provides high-technology engineering and manufacturing services to global OE