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INR-520 Bn DAC Approval: Army-led Push with BHE & BDL as the Clearest Winners

The Defence Acquisition Council’s INR-520 Bn AoN approval marks a meaningful acceleration in India’s defence capital procurement cycle, with a clear shift towards Army modernisation. This, we estimate, accounts for 65–70% of the outlay (INR 340–360 Bn). In our view, the mix of approvals highlights a decisive shift towards air defence systems, anti-drone capability and survivability solutions, reinforcing three key structural themes:

1) Layered air defence dominance (V-SHORADS to MRSAM)

2) Increasing focus on electronic warfare and drones

3) Continued push towards indigenisation

While allocations to the Navy (estimated at INR 80–100 Bn, 15–20%) and the Air Force (estimated at INR 60–80 Bn, 10–15%) are comparatively smaller, we believe they remain strategically well-aligned with future capability development. In our view, these investments focus on areas, such as maritime surveillance and high-altitude pseudo satellites (HAPS), which are likely to play a critical role in next-generation warfare

Order Visibility Strengthens: Broad-based Scalable Opportunities Emerging

We believe the Army’s procurement pipeline accounts for 65–70% of the total outlay (INR 340–360 Bn) – covering systems such as AKASH TARANG, MRSAM, V-SHORADS, MPATGM, active protection systems and loitering munitions. This reflects a clear shift towards a more agile and technology-driven defence posture. The focus on building a multilayered security architecture strengthens both, threat detection and response capabilities, while also aligning with evolving warfare dynamics such as drones and electronic warfare. At the same time, we believe selective allocations to the Navy and Air Force suggest a balanced capital deployment strategy, supporting immediate operational readiness alongside long-term capability creation.

From a sector standpoint, we see the opportunity as largely concentrated in air defence and missile systems, which could account for a significant portion of the outlay. In this context, Bharat Electronics Ltd emerges as a core beneficiary, likely to capture significant share of over INR-200 Bn, given its strong positioning in radars, electronic warfare and system integration, enabling participation across multiple platforms.

In our view, Bharat Dynamics Ltd is well-positioned to emerge as a key beneficiary of the missile-heavy procurement mix, particularly across MRSAM, V-SHORADS and MPATGM programs. We estimate BDL’s addressable opportunity within this cycle at INR 120–180 Bn, forming a meaningful share of the broader INR 250–300 Bn air defence and missile opportunity. While the exact conversion will depend on contract structuring and localisation dynamics, we believe the pipeline offers strong medium-term visibility, with order inflows likely to scale up over FY27– FY28 as approvals convert into executable contracts.

Our View:

We believe the INR-520 Bn DAC approval reinforces a structural growth cycle for India’s defence sector, rather than a one-off trigger. The continued focus on indigenisation and technology-led procurement is anticipated to drive steady order visibility over the next 12–24 months. We remain positive, with BHE as a consistent compounder and BDL as a direct play on missile-led growth, while drones and electronic warfare add further long-term upside.

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