Defence Manufacturing Boost? 4 Stocks to Watch After DRDO's Latest Move

#2 Bharat Forge

Second on the list is Bharat Forge.

Bharat Forge is a firm providing components and solutions for sectors like automotive, power, oil and gas, construction, and mining, rail, marine, defence, and aerospace.

The company has presence across 18 manufacturing locations in five countries.

Through its subsidiary Kalyani Strategic Systems, it's establishing a defence energetics unit in Andhra Pradesh, comprising ammunition filling, gun propellant, warhead and energetics complexes at Sri Sathya Sai district with an investment of Rs 10 bn.

With the DcPP model actively seeking private partners who can take technology from lab to large-scale production, Bharat Forge's multi-country manufacturing muscle and its dedicated defence energetics facility make it one of the more credible candidates to bag such partnerships.

Coming to its financials, Bharat Forge's sales and net profit have grown at a CAGR of 13% and 21%, respectively.

Its ROE and ROCE have averaged 9% and 14% respectively during the same period.

Going forward, the company has a heavy order book almost nearing Rs 100 bn. It currently derives around 10-11% of its revenue from the defence sector.

During its recent earnings call, the company's Vice Chairman and Managing Director, mentioned that this 10-11% contribution could potentially increase to approximately 18-20% if circumstances align favourably.

The company sees a strong uptick driven by commencement of the ATAGS order and the beginning of the CQB carbine production. The management expects 30-40% plus growth in defence business next year.

The aerospace business is expected to experience robust growth next year and even more substantial expansion the following year, driven by the launch of new programs and the addition of new capacities, with considerably larger capacities becoming operational in the year after next.

For more details, check out its financial factsheet.

#3 Paras Defence & Space Technologies

Third on the list is Paras Defence.

Paras Defence & Space Technologies is engaged in manufacturing, development, designing, supply of an array of defence and space engineering products and solutions.

In the drone and anti-drone space, Paras Defence is leveraging its years of experience in optics. It's the only Indian company that manufactures cameras for drones and Unmanned Aerial Vehicles (UAVs).

Last year in June 2025, Paras Defence announced a Joint Venture (JV) with Heaven Drones, the world's leading hydrogen-powered drone manufacturer, based in Israel.

This is to develop the first-ever ready-to-fly hydrogen-powered drones in India with over 12 hours of flight time, 22 kg of payload, and more.

In recent months, DRDO has been actively floating DcPP tenders for UAV programmes and with Paras being the only Indian company making drone cameras, plus a hydrogen-drone JV already in motion, it's hard to imagine them not figuring in those conversations.

Coming to its financials, Paras Defence's sales and net profit have grown at a CAGR of 20% and 26%, respectively.

Its ROE and ROCE have averaged 8% and 13% during the same time.

While Paras Defence is still relatively small compared to larger defence companies, its niche positioning gives it an advantage.

The company plans to invest around Rs 5 billion (bn) in advanced electronics and semiconductor manufacturing. If successful, this initiative could strengthen domestic supply chains for defence electronics and reduce dependence on imports.

For more details, check out Paras Defence's financial factsheet.

#4 Apollo Micro Systems

Last on the list is Apollo Micro Systems.

Apollo Micro Systems is engaged in the design, development, and assembly of custom-built electronics and electro-mechanical solutions.

The company offers solutions based on state-of-the-art technologies for aerospace and defence. It also caters to the railways, automotive, and homeland security markets.

The wide spectrum of technological solutions and end-to-end design, assembly & testing capabilities gives it an edge. The company's in-house R&D centre is CEMILAC certified to develop airworthiness systems.

Now, what makes the DcPP model interesting for Apollo is that it doesn't just need a manufacturer, it needs a partner who can design, develop, and deliver.

Apollo's end-to-end capabilities, from custom electronics to airworthiness-certified systems, check almost every box on that list.

Coming to its financials, Apollo's sales and net profit have grown at a CAGR of 18% and 32%, over the past 5 years.

Its ROE and ROCE have averaged 6% and 14% during the same time.

Going forward, India's defence sector is likely to see increased outlay. Apollo Micro Systems has been positioning itself through expansion and acquisitions. It aims to be a top-tier supplier for weapon systems.

With increasing focus on self-reliant defence capabilities, the company is focused on vertical integration and scalable manufacturing to capture the expanding opportunity.

The management expects improvement in operating margins and a reduction in working capital cycle by 100-120 days from FY27, as a larger share of the order book transitions into serial production mode.

For more details, check out its financial factsheet.

Conclusion

The DcPP model is perhaps the clearest signal yet that the government means business in the business space, not just on manufacturing, but on building genuine, homegrown technological capability.

For investors, the window to get into quality defence names before this story fully plays out is still open, but it won't stay that way forever.

The companies on this list are potential long-term pillars of India's defence industrial complex. That's a rare thing to be able to say about any sector.

That being said, investors should evaluate the company's fundamentals, corporate governance, and valuations as key factors before making investment decisions.

Happy investing.

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