Shares of private defence firms like Raymond and Apollo Micro Systems rallied as companies reported expanded order books. The sector is benefiting from the government's push toward competitive bidding, allowing private players to gain market share from traditional state-run firms. Investors are now evaluating the execution capabilities of these companies to turn long-term orders into actual revenue.
Private sector defence companies in India have seen a sharp rise in stock prices, reflecting a broader structural shift in the national defence industry. The government has been moving away from the traditional model of awarding contracts to state-run entities through nomination. Instead, it is increasingly using competitive bidding, which allows private companies to participate and win major defence contracts. This policy change has contributed to the private sector's share of total defence revenue rising from 9% in FY23 to 16% in FY26.
Companies are showing strong momentum through significant order wins. For instance, Raymond has secured an order book valued at over ₹5,960 crore, with a strategic focus on precision-engineered assemblies and components for aircraft engines. Similarly, Apollo Micro Systems has grown its order book to ₹1,704 crore as of the first quarter of fiscal year 2027. The company is actively expanding its footprint beyond electronics into more complex areas like explosives and rocket motors.
While the increase in order books suggests potential for long-term revenue, investors should be aware of the business risks involved in the defence sector. Winning an order is the first step, but delivering it on time and within budget is the real challenge. Large, multi-year contracts are subject to risks such as cost overruns, changes in government procurement policies, or delays in raw material supplies. Unlike service-based sectors, defence manufacturing requires heavy investment in machinery and testing facilities, which can impact cash flow and profit margins in the short term.
The global market also provides an opportunity for Indian firms. With the increased credibility of indigenous technology like the Akashteer command system and BrahMos missiles, Indian exports are rising. Companies like Unimech are also entering the maintenance, repair, and overhaul market for aircraft, which can provide a steady, recurring income stream compared to one-time equipment sales.
Moving forward, the primary monitorable for investors will be execution. It will be important to track how quickly these companies convert their large order books into actual revenue and whether they can maintain healthy profit margins while scaling up production. Success will depend on the company's ability to manage complex supply chains and meet the strict quality standards required by defence forces.