India’s defence sector is witnessing a defining moment with the government approving capital acquisition projects worth over Rs 1 lakh crore, positioning domestic companies for significant growth. According to a detailed report by brokerage firm Nomura, these approvals are poised to directly benefit Bharat Electronics (BEL), Larsen & Toubro (L&T), and select Indian defence shipyards, marking a critical turning point for India’s indigenous defence manufacturing push.
Massive Capital Approvals Fuel Sector Momentum
At the heart of this optimism is the Defence Acquisition Council’s (DAC) recent approval of ten capital acquisition proposals under the “Acceptance of Necessity” category, totalling nearly Rs 1.05 lakh crore. The acquisitions will be sourced under the Buy-Indian (IDDM) model, reinforcing the government’s commitment to indigenous procurement and reducing dependency on imports.
The approved projects include advanced surface-to-air missiles, electronic warfare systems, armoured recovery vehicles, moored mines, and submersible autonomous vessels, all of which will enhance the mobility, air defence, and operational preparedness of the Indian armed forces. Nomura states these procurements will significantly strengthen India’s defence capabilities while offering immense opportunities for domestic manufacturers.
Key Projects Driving Opportunities
Among the most notable projects highlighted by Nomura is the Quick Reaction Surface-to-Air Missile (QRSAM) system, valued at around Rs 30,000 crore. This mobile air defence solution is designed to engage multiple targets swiftly and effectively. Bharat Electronics is expected to play a crucial role in this project by providing radars, command and control systems, and tracking modules, while Larsen & Toubro will supply the missile launchers, and Bharat Dynamics will manufacture the missiles.
Nomura indicates that the QRSAM project is already 90% indigenised and has the potential to reach 99% localisation. The brokerage emphasises that the probability of Bharat Electronics securing the QRSAM contract by the end of 2025 has notably increased due to its significant contributions in radar and fire-control systems.
Another major development is the revival of the Mine Countermeasure Vessel (MCMV) programme by the DAC, which had been delayed due to cost and technology transfer challenges. A formal Request for Proposal (RFP) is expected to be issued to Indian shipyards, including Goa Shipyard, with the first vessel projected to be delivered within 7-8 years of finalising the contract.
Nomura’s Preferred Defence Picks
Based on its analysis, Nomura has identified Bharat Electronics as a top pick, citing its integral role in radar and command systems crucial for the QRSAM project. The report highlights that BEL is well-positioned to capitalise on the upcoming contract opportunities, making it a favourable investment.
Larsen & Toubro also emerges as a strong contender, given its pivotal role in providing missile launch systems for the QRSAM project, with Nomura maintaining a ‘Buy’ recommendation on the stock.
While Bharat Dynamics has not been rated by Nomura, the firm acknowledges its vital position as the primary missile manufacturer for the QRSAM programme, expecting significant subcontracting opportunities that could benefit the company.
The report further highlights the potential of Indian defence shipyards, particularly Goa Shipyard, which is expected to play a critical role in the MCMV project, underlining the positive outlook for the sector.
Nomura’s analysis reflects the larger momentum in India’s defence sector, driven by strong policy backing, rising indigenous procurement, and a strategic shift towards reducing import dependence. With the government’s clear focus on boosting domestic manufacturing and modernising the armed forces, the stage is set for Bharat Electronics, L&T, and Indian defence shipyards to play a transformative role in shaping the country’s defence future while creating strong investment opportunities in the sector.
