Blitz Bureau
NEW DELHI: Private defence companies are set to clock 16-18 per cent revenue growth in the current financial year as domestic demand continues to remain strong, according to a Crisil report released on September 23. This follows a 20 per cent compound annual growth rate (CAGR) logged between fiscal 2022 and 2025. The strong growth momentum is supported by a significant policy push by the Government, which drew in sizeable private investments. The investments in research and development (R&D) and capex have strengthened the capabilities of firms, enabling them to secure larger orders. Profitability is seen as stable with operating margins range-bound at 18-19 per cent, the report states.
Equity infusions over the past three fiscal years will keep balance sheets healthy, despite incremental working capital debt and capital expenditure (capex) plans, the report further states. The analysis is based on data from over 25 private defence companies rated by Crisil Ratings, which together contribute nearly half of the industry revenues.
While public sector undertakings dominate India’s defence industry, the revenue share of private companies is on the rise. They have capitalised on the strong Government impetus to domestic procurement and self-reliance, reflected in higher capital outlays, in addition to military spending stemming from geopolitical uncertainties, the report points out. This, in turn, has attracted significant capital inflows through initial public offerings and private equity investments and enabled comfortable funding of innovation and R& D in the sector. Jayashree Nandakumar, director, Crisil Ratings, said: “Over the past three fiscals, defence companies have seen equity infusions of around Rs 3,600 crore on a networth base of Rs 4,760 crore at the end of fiscal 2022, largely through public offerings and private equity. While a third of such monies went into working capital funding, almost half were utilised for capital expenditure, R&D, and innovation, thus enhancing capabilities among private sector defence companies, enabling them to secure larger orders.”
