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Propelled by strong government impetus and the ‘Atmanirbhar Bharat’ initiative, the revenue of the top 25 private aerospace and defence companies is set to grow 20 per cent to Rs 13,500 crore this fiscal (FY25), a report showed on Tuesday. 

Operating margin is likely to rise 50-60 basis points on sustained revenue growth, economies of scale and better-fixed cost absorption, and should remain stable over the medium term, aided by price escalation clauses in contracts, according to the report by CRISIL Ratings.

While public sector undertakings (PSUs) dominate the Indian defence industry, the revenue share of private players has been on the rise.

This is because liberalisation in defence equipment manufacturing and increasing transparency in bidding guidelines have helped private entities secure more orders in domestic and overseas markets.

According to Jayashree Nandakumar, Director, CRISIL Ratings, the order book to operating income is expected to improve to around 4.5 times in fiscal 2025 to Rs 50,000-Rs 51,000 crore, from 3.5 times in fiscal 2023, driving revenue growth.

The report further mentioned that gross current assets may increase further from the already high level of 450-500 days on average, driven by large inventory and receivables of around 230 and 120 days, respectively.

“Players may undertake capital expenditure (Capex) of Rs 650-700 crore this fiscal to expand their existing capacities by 12-14 per cent and require an additional Rs 600-700 crore to meet the incremental working capital expenses,” said Sajesh KV, Associate Director, CRISIL Ratings.