India's Ambitious Drone Push
The Indian government is reportedly gearing up to significantly bolster its domestic drone manufacturing capabilities with a substantial incentive package expected in the Union Budget 2026. Widely circulated reports suggest a ₹ 10,000 crore allocation spread over multiple years, designed to accelerate the 'Drone Shakti' initiative.
This strategic move aims to reduce India's reliance on imported drone technology and parts, fostering a self-sufficient defense and industrial ecosystem. The program is structured to provide robust financial support and fiscal certainty for capital-intensive manufacturing investments.
The 'Drone Shakti' Incentive Scheme
Expected to span five years, the new scheme moves beyond traditional incentives by adopting a "Two-Tier" subsidy approach. The first tier offers a 10-15% subsidy on capital expenditure incurred for setting up drone manufacturing facilities. Complementing this, a second tier provides an equivalent 10-15% subsidy linked directly to manufacturing output.
A crucial component of the scheme is the mandate for 50-60% domestic content in drone production. This stipulation is designed to drive demand for local component suppliers and Original Equipment Manufacturers (OEMs), making 'Make in India' drones more competitive globally.
Zen Technologies: Diversifying Defence Capabilities
Zen Technologies, a prominent player in drone and anti-drone systems, is strategically pivoting towards anti-drone solutions, which are projected to contribute about 50% of its future revenue. The company's expertise spans drone propulsion, advanced neutralization systems, and detection/jamming capabilities across various frequencies.
Through acquisitions like Vector Techniques and TISA Aerospace, Zen is enhancing its capacity to produce aerospace-grade motors and loitering munitions. Bhairav Robotics acquisition further strengthens its position in defence robotics. Zen's core strength lies in its ownership of Indigenous Intellectual Property (IP), ensuring system security and alignment with the Ministry of Defence's 'Positive Indigenisation Lists'. The company is also integrating AI into its anti-drone systems for advanced threat classification.
Despite a recent revenue decline of 33% in the first six months of FY26, Zen Technologies maintains an ambitious target of ₹ 6,000 crore in revenue for FY27-FY28, supported by a consolidated order book of ₹ 675 crore as of September 30, 2025.
Paras Defence and Space Technologies: Eyes and Jammers for Drones
Paras Defence and Space Technologies is actively involved in manufacturing critical drone components and systems. It is the sole Indian company producing electro-optic cameras for drones and UAVs, partly through a joint venture with Israel's Controp Precision Technologies. The company is also developing India's first hydrogen-powered drone with Heven Drones, Israel, offering extended flight times.
Paras manufactures anti-drone systems, including the Dexter-20 model capable of jamming threats within a 2 km range. Its subsidiaries, Paras Aerospace and Paras Anti-Drone Technologies, focus on drone-based solutions for defence, industrial, and agricultural use, as well as countering aerial threats. These drone-related businesses accounted for 4.7% of FY25 revenue.
Paras Defence reported robust financial growth, with revenue increasing by 16.4% in H1 FY26 to ₹ 199 crore and PAT rising by 22.2% to ₹ 33 crore. Its order book stood at ₹ 1,000 crore as of November 17, providing over two years of revenue visibility.
IdeaForge Technology: Leading the UAV Pack
IdeaForge Technology holds a dominant 50% market share in India's UAV market and ranks third globally in dual-use drone manufacturing. Its product portfolio includes the SWITCH VTOL hybrid for long-range surveillance and military mapping, and next-generation drones like the ZOLT Tactical UAV and YETI logistics platform. The company's drones are designed for extreme conditions and have received a NATO Stock Number, affirming their compliance with global military standards.
However, IdeaForge faced a significant revenue decline of 56% year-on-year to ₹ 54 crore in H1 FY26, leading to a widened EBITDA loss and tripled net loss. Despite this, gross margins improved. The company's order book was ₹ 238 crore as of October 28, 2025, with visibility for just over a year. IdeaForge is also establishing a joint venture in the U.S. to facilitate local manufacturing and navigate trade barriers.
Financial Performance and Outlook
The proposed budget incentives are expected to provide a significant boost to these companies, potentially driving substantial revenue growth and improving profitability. However, current financial performances vary, with IdeaForge experiencing a sharp downturn and Zen Technologies showing sluggishness, albeit with improved margins. Paras Defence demonstrates consistent growth. The 50-60% local content rule could act as a strong catalyst for companies focused on indigenous manufacturing.
Valuation Perspective
Valuation analysis shows Zen Technologies trading below its 3-year median P/E and the industry median, presenting a potentially attractive entry point after its recent correction. Paras Defence trades at a premium but remains slightly below its median. IdeaForge's heavy dependence on the drone sector makes it vulnerable, though its strong market position and global certifications are key assets. Zen leads in RoCE and RoE among the compared companies.
Impact on the Indian Market
This government push is anticipated to have a significant positive impact on the Indian stock market, particularly within the defence and technology sectors. It will foster innovation, create jobs, reduce import dependency, and potentially position India as a global drone manufacturing hub. The increased fiscal certainty and addressable incentive pool are expected to encourage further investment in R&D and manufacturing infrastructure.
Impact Rating: 8/10