Private Defence Companies in India to Grow by 20% in 2024-25: CRISIL Ratings
Private defence companies in India are expected to see a 20% revenue growth in the financial year 2024-25, reaching approximately Rs 13,500 crore. This growth is driven by increased government spending and efforts to boost private sector participation.
The operating margins of these companies are likely to improve by 50-60 basis points due to sustained revenue growth, economies of scale, and better fixed cost absorption. The order book to operating income ratio is projected to rise to 4.5 times, amounting to around Rs 50,000-51,000 crore in fiscal 2025.
Companies may invest Rs 650-700 crore in expanding capacities by 12-14% and require an additional Rs 600-700 crore for incremental working capital expenses. Despite these investments, strong balance sheets and healthy profitability are expected to keep credit profiles stable.
However, future growth could be affected by changes in defence policies, geopolitical uncertainties, and semiconductor supplies.
Key Figures
| Metric | Value |
|---|---|
| Revenue Growth | 20% |
| Revenue | Rs 13,500 crore |
| Order Book to Operating Income Ratio | 4.5 times |
| Capex | Rs 650-700 crore |
| Interest Coverage Ratio | 4.7 times |
According to Jayashree Nandakumar, Director at CRISIL Ratings, the strong government impetus, including initiatives like Atmanirbhar Bharat, Defence Acquisition Policy, and Defence Production and Export Promotion Strategy, has significantly contributed to this growth.
Sajesh K V, Associate Director at CRISIL Ratings, added that despite the need for higher working capital, the sector’s strong balance sheets and prudent funding are expected to maintain stable credit profiles.
