India’s defence technology sector is experiencing a transformative surge, marking 2025 as a landmark year with its highest-ever annual capital inflow of USD 247 million (approximately Rs 2,270 crore), according to a report by data intelligence platform Tracxn. This influx has propelled the sector’s cumulative funding to a historic milestone of USD 711 million (approximately Rs 6,535 crore), reflecting a significant shift from exploratory ventures to “infrastructure-style conviction.”
The report highlights a notable evolution in the ecosystem, characterised by larger investment cheques and a focus on execution-driven capabilities. “India’s defence tech sector has attracted USD 711 million in all-time equity funding across 232 rounds,” Tracxn noted. Annual funding has surged from USD 5 million in 2016 to a peak of USD 247 million in 2025 year-to-date (YTD). This growth trajectory is evident in the funding increases from USD 37 million in 2021 to USD 75 million in 2022, followed by USD 139 million in 2023, and USD 125 million across 42 rounds in 2024.
Despite a lower number of funding rounds in 2025 YTD (30 rounds), total funding nearly doubled year-over-year, largely driven by Raphe mPhibr’s USD 100 million Series B round. The number of annual funding rounds increased from 5 in 2016 to 42 in 2024, before moderating in 2025 YTD. This data indicates intensifying capital concentration, with top-five companies absorbing about 53% of all funding. This reflects investor pre-selection of future defence platform anchors rather than broad-based portfolio construction, the report noted.
Non-combat systems emerged as the preferred choice for investors, accounting for 78% of the total capital and 74% of startups in the ecosystem. Combat weapon systems accounted for 15% of startups and USD 106 million in total funding, while defence support and training solutions made up the remainder of the value chain.
Geographically, Bengaluru led the sector, securing USD 216 million across 61 rounds. It was followed by Noida (USD 168 million across 19 rounds) and Chennai (USD 88 million across 26 rounds). Together, these three cities account for over 66% of the total funding in the Indian defence tech ecosystem.
The report identified 116 venture capital firms participating in the sector. Venture Catalysts emerged as the most active investor with six rounds, followed by HDA Tech Growth, Inflection Point Ventures, and Accel, each with five rounds.
While exit activity remained sparse, the report described it as “structurally meaningful.” Since 2010, the sector has seen five IPOs and three acquisitions. The report said liquidity in this space is governed by “sovereign trust and procurement embeddedness,” establishing defence tech as a long-horizon asset class.
“Defence technology in India is no longer defined by individual platforms, but by integrated systems spanning AI, autonomy, ISR, secure communications, and manufacturing depth. Policy reforms, rising defence budgets, and geopolitical imperatives are positioning defence technology as national infrastructure, linking military readiness, industrial capacity, and long-term economic value,” Tracxn noted.
This surge in investment underscores a strategic pivot towards building a robust defence technology infrastructure in India. The focus on non-combat systems and the concentration of capital in top companies suggest a maturing ecosystem poised for significant growth. As policy reforms and geopolitical factors continue to drive the sector, India’s defence technology landscape is set to play a pivotal role in the nation’s industrial and economic future.