In its latest Q3 preview note on capital goods and defence, MOFSL has reaffirmed its ‘Buy’ ratings on Bharat Electronics Ltd (BEL), Bharat Dynamics Ltd (BDL), Hindustan Aeronautics Ltd (HAL), and Astra Microwave, while maintaining a ‘Neutral’ stance on Zen Technologies. Notably, BEL stands out as MOFSL’s top defence pick, reflecting its robust growth prospects and strategic importance in the sector.
MOFSL anticipates BEL’s Q3 profit to surge by 13% year-over-year (YoY) to Rs 1,487.30 crore, driven by a 17.8% YoY increase in sales, which are expected to reach Rs 6,780 crore. Similarly, BDL is projected to report a significant 40.4% YoY growth in profit, amounting to Rs 206.60 crore, supported by a 37.6% YoY rise in sales to Rs 1,145.30 crore. HAL is also expected to deliver a strong performance, with a 29.1% YoY increase in profit to Rs 1,859.30 crore, backed by a 13.2% YoY sales growth to Rs 7,874.50 crore.
However, Astra Microwave is anticipated to face a challenging quarter, with a 35.7% YoY drop in profit to Rs 30.50 crore, despite a modest 1.4% YoY increase in sales to Rs 262 crore. Zen Technologies, on the other hand, is expected to post a 26.8% YoY rise in profit to Rs 49 crore, albeit on a 1.7% drop in sales to Rs 139.10 crore.
The defence sector in India is experiencing a significant boost, as the Defence Acquisition Council (DAC) approved capital acquisition proposals worth Rs 79,000 crore during its winter session. This brings the FY26 year-to-date approvals to Rs 3.3 lakh crore, nearly double the defence capital outlay of Rs 1.8 lakh crore. Almost half of these approvals were announced in Q3FY26, with proposals worth Rs 1.6 lakh crore unveiled in October and December 2025 combined. This influx of approvals provides order inflow visibility for the next 2-4 years, as the conversion of Acceptance of Necessity (AoN) into firm orders typically takes time.
Moreover, the DAC has extended the current emergency procurement window for the Armed Forces until mid-January 2026. This extension allows for the continued fast-track purchase of critical weapons, platforms, and equipment to meet urgent operational needs. Other key developments include the completion of user trials for the Akash-NG system, clearing it for induction. MOFSL expects BDL and BEL to receive production and supply contracts in CY26, with ramp-up orders to follow.
Additionally, the 5th F-404 engine has been delivered to HAL by GE, and the Government of India has rolled out guidelines for two major shipbuilding schemes, with a combined outlay of INR 447 billion. These developments underscore the government’s commitment to strengthening the defence sector and enhancing the country’s military capabilities.
In summary, the defence sector in India is poised for significant growth, driven by substantial government investments and strategic initiatives. Companies like BEL, BDL, and HAL are well-positioned to capitalise on these opportunities, while Astra Microwave and Zen Technologies navigate their respective challenges. The sector’s growth trajectory is expected to create a ripple effect, benefiting various stakeholders and contributing to the overall development of the defence industry in India.