The defense industry in India has seen a huge growth in the last few years due to government support and policies such as “Make in India” and “Atmanirbhar Bharat”. India is amongst the top five spenders on defense equipment given its large economic size and threats from unfriendly neighbors like China and Pakistan.

India’s exports have also grown by 10x to INR 16,000 crores in FY23 exporting to 85 countries. The exports comprise artillery, guns, rockets, missiles, helicopters, etc. The target is to more than double its exports to INR 35,000 crores by 2025. The global defense industry has a huge potential, rising to an all-time high of more than $2 trillion as geopolitical conflict increases between the West and China/ Russia. Defense is a recession-proof industry as it is STRATEGIC in nature and thus provides a good investment opportunity right now.

Historically only government-owned companies have dominated this sector as the government did not allow private companies but given India’s huge needs, it has also allowed private firms to enter. India also has a Defense Offset Policy, where a foreign manufacturer has to make a certain percentage of its order in India giving a leg up to domestic players and technology transfer.

Also, read Best Biotech Stocks to Buy in India.

Now let us take a look at some of the prominent companies in the Defense sector in India. Amongst the PSUs, some of the better stocks are:

1. HAL or Hindustan Aeronautics Ltd. which makes helicopters, fighters, engines, and other forms of aircraft.

2. Mazagon Dock Shipbuilder is a defense shipyard that makes warships, missiles, boats, and submarines. It also makes passenger ships and barges.

3. Cochin Shipyard is another shipyard based in Kerala.

4. BEL is India’s largest PSU in the defense electronics sector making radars, electronic warfare, missile systems, etc.

5. BEML or Bharat Earth Movers Ltd. is a Bangalore-based company and as the name suggests engages in making trucks, vehicles, and transport systems for the defense sector.

Amongst the private players, good defense companies in India are:

1. Solar Industries deals in defense and industrial explosives as well as explosive initializing systems.

2. Bharat Dynamics Ltd. which was started by an ex-DRDO official. It makes missiles, air defense systems, and torpedos.

3. MTAR Technologies produces missile technologies and components and supplies them to ISRO and DRDO. It also serves the space and nuclear industries.

4. PARAS is a small and upcoming defense company with a lot of potential and unique capabilities in defense electronics as well as space optics and heavy engineering.

5. Conglomerates like Tatas, L&T, and Kalyani Group also have significant operations.

Defense stocks are best suited for investors looking for steady income in the form of dividends. Do not expect sharp price appreciation. Though given the momentum in this industry currently, companies should give good stock performance as well.