Top 5 Undervalued Drone Stocks to Add to Your Watchlist

Imagine standing on a runway just before take-off. You see the precision, feel the anticipation, that's what the drone industry in India is today.

From farming to logistics, and defence surveillance to smart city mapping, drones are set to become the backbone of India's next tech-led revolution.

With Atmanirbhar Bharat fuelling domestic innovation and policy support by the government, this sector is a strategic investment opportunity for investors.

But while the buzz is high, many investors are looking for the drone stocks to add to their watchlist.

In this article, we will explore the top five undervalued drone stocks that are quietly building momentum and might just take off before the crowd catches on.

Larsen & Toubro Ltd (L&T)

L&T was established in 1938 in Mumbai, India. Initially, the company focused on the manufacturing of defence equipment and the process industries.

But through 1940, L&T expanded into construction, marking its entry into infrastructure development, and by the 1950s, the company constructed India's first cement plant.

From there, L&T's story is one of scale and diversification. The company expanded into hydrocarbons, heavy engineering, and power, setting milestones across every major sector.

Fast forward from construction to next-gen tech like drones and AI-driven surveillance, L&T isn't just keeping up - it's steering the transformation.

Drone Operations and Development

L&T has strategically positioned itself in the UAV (Unmanned Aerial Vehicle) market by offering indigenous solutions for Tactical UAVs, including both fixed-wing and vertical take-off and Landing (VTOL) models.

These models are designed specifically for high-altitude surveillance, think India's tough border terrain.

The versatility of L&T drone technology is further demonstrated by their ability to configure these UAVs for Naval applications in the future, and it will expand their market potential.

As one of India's largest private sector investors in defence and aerospace, L&T is developing several next-generation defence systems.

The company's precision engineering and systems business, which includes its drone operations, is expected to become substantial in size and revenue within next4-5 years.

L&T Financial Performance

If we break down the financial numbers of L&T:

L&T Financial Snapshot (2021-25)

Particulars	FY21	FY22	FY23	FY24	FY25
Turnover (In Rs million)	1,359,790	1,565,210	183,341	2,211,130	2,557,340
Net Profit (In Rs million)	129,210	104,190	125,310	155,470	176,730
OPM (%)	17%	16%	15%	13%	13%
Dividend Payout (%)	44%	36%	32%	36%	31%
EPS in Rs	82.47	61.7	74.5	95	109.35

Source: Company Annual Report

L&T financials reflect steady topline growth with rising turnover from ?1.36 trillion in FY21 to ? 2.55 trillion in FY25.

Profitability has improved too, with net profit growing consistently, showing the brand's strong positioning in a changing macro environment.

Operating Profit Margin (OPM) has compressed slightly, earnings per share (EPS) have moved sharply over 30% in 5 years, while maintaining a healthy dividend payout.

Overall, the fundamentals remain robust with strong visibility across infrastructure, defence and drones.

Bharat Electronics Ltd (BEL)

BEL was established in 1954 under the Ministry of Defence to meet the specialised electronic needs of the Indian Defence sector.

Over time, BEL has emerged as a multi-product, multi-technology conglomerate that provides state-of-the-art products and systems to India's armed forces.

These include Radar & Fire Control Systems, Electronic Warfare & Avionics, Naval Systems, and Electro Optics, among others.

BEL has also achieved Navratna status, placing it among an elite group of Public Sector undertakings in India.

The company has delivered several milestone projects over the years, including the Akasha Air Defence Weapon System, Coastal Surveillance System, Weapon Locating radar, and 3D Tactical Control radar.

Drone Operations and Developments

Apart from the missile systems, BEL is quietly building drones too. A sophisticated tethered UAV system built for long-endurance surveillance.

Think of it as a digital sentry, perfect for guarding airbases and securing borders.

The setup includes a hexacopter, EO/IR sensors, a winch system, and ground control, offering surveillance coverage up to 2km by day and 1km by night.

It can hover at 100 meters altitude for 6 hours straight, powered via cable, with a smart battery backup for emergencies.

BEL's drone ambitions don't stop here; the upcoming Hexacopter-20 steps things up, boasting a MALE (Medium Altitude Long Endurance) platform tailored for collaborative missions.

From disaster relief to LIDAR mapping, its plug-and-play payload options and single-operator control make it versatile, rugged, and mission-ready.

BEL Financial Performance

If we look at the financial numbers:

BEL Financial Snapshot (2021-25)

Particulars	FY21	FY22	FY23	FY24	FY25
Turnover (In Rs million)	141,090	153,680	177,340	202,680	237,690
Net Profit (In Rs million)	21,000	24,000	29,860	39,850	53,230
OPM (%)	23%	22%	23%	25%	29%
Dividend Payout (%)	46%	46%	44%	40%	33%
EPS in Rs	2.87	3.28	4.08	5.45	7.28

Source: Company Annual Report

BEL's financials paint a steady growth story with turnover and net profit more than doubling from FY21 to FY25.

Improving margins (29% OPM in FY25) and rising EPS reflect strong operational efficiency. While dividend payout is moderating, the reinvestment signals confidence in future growth.

Zen Technologies Ltd

Zen Technologies was incorporated in 1993, began as a pioneer in developing and manufacturing defence training simulators in India.

The company started with small arms training simulators and gradually expanded its portfolio to include a wide range of military training solutions.

Over the decades, Zen Technologies has established itself as a trusted partner for the Indian Armed Forces. It has maintained a strong focus on research and development, consistently investing in creating advanced simulation technologies that reduce training costs while improving effectiveness.

This R&D focused approach has positioned the company for its expansion into unmanned systems.

Drones Operations and Development

Zen Technologies has strategically expanded its product portfolio beyond training simulators to include unmanned systems, particularly tactical drones for defence applications.

The company's drone initiative includes the development of both fixed-wing and multirotor platforms tailored for different operational requirements.

Zen's approach is to create robust, field-deployable systems that can withstand harsh environmental conditions while providing reliable performance.

The company has also been working on anti-drone systems, recognising the growing need for counter-UAS capabilities in modern scenarios.

Zen Technologies positioned itself as a provider of complete drone ecosystems rather than just hardware, offering integrated solutions that include ground control stations, training systems, and maintenance support.

Zen Technologies Financial Performance

If we look at the financial numbers:

Zen Technologies Financial Snapshot (2021-25)

Particulars	FY21	FY22	FY23	FY24	FY25
Turnover (In Rs million)	550	700	2190	4400	9740
Net Profit (In Rs million)	30	30	500	1300	2990
OPM (%)	14%	7%	33%	41%	38%
Dividend Payout (%)	26%	40%	4%	7%	6%
EPS in Rs	0.39	0.25	5.38	15.22	31.04

Source: Company Annual Report

From a modest base, the company has delivered a stellar financial leap, 10x revenue growth and a 100x profit jump in just five years.

Strong operating margins (above 38% since FY23) reflect sharp cost control, while dividend payout remains conservative, rising EPS signals robust value creation ahead.

RattanIndia Enterprises Ltd

RattanIndia Enterprises has evolved from its roots in the power sector to become a diversified conglomerate exploring high-growth technology sectors.

The company is part of the broader RattanIndia Group, which has established businesses across power generation, finance, and infrastructure.

In recent years, RattanIndia Enterprises has pivoted toward emerging technologies, recognising the transformative potential of sectors like drones, electric vehicles, and fintech.

Drone Operations and Developments

RattanIndia Enterprise has entered the drone game with purpose and precision through its subsidiary, NeoSky India.

But this isn't just another drone venture; NeoSky is building a full-stack drone ecosystem aimed at solving real problems in agriculture, infrastructure, logistics, and emergency response.

By forging partnerships with global players, NeoSky is quickly ramping up capabilities, and its focus on commercial use-cases puts it in a spot as India's drone adoption is rising.

RattanIndia Enterprises Financial Performance

If we look at the financial numbers:

RattanIndia Enterprises Financial Snapshot (2021-25)

Particulars	FY21	FY22	FY23	FY24	FY25
Turnover (In Rs million)	0	140	41,240	56,100	68,660
Net Profit (In Rs million)	0	5,540	-2,860	4,240	810
OPM (%)	-1670%	-156%	1%	1%	4%
EPS in Rs	0	4.01	-2.06	3.08	0.61

Source: Company Annual Report

The company shows the highest revenue scale-up from FY22 onwards, reflecting its aggressive entry into the drone and tech space.

While FY23 saw a net loss, profitability returned in FY24, though FY25 net profit moderated.

Margins remain razor-thin, indicating execution risk, but early signals potential for long-term scalability.

Paras Defence and Space Technologies Ltd (PDST)

PDST was founded in 2009, has rapidly established itself as a specialised player in defence and space technologies.

The company went public in 2021 with an IPO that was oversubscribed by a remarkable 304 times, demonstrating strong investor interest in India's emerging defence technology sector.

As a relatively younger company compared to established giants, PDST brings agility and innovation to the defence technology landscape.

Drone Operations and Developments

PDST has a deep expertise in defence optics, sensor platforms and communication systems. PDST is focusing on the tech backbone of UAVs.

Instead of chasing scale, it's doubling down on niche, high-value components like stabilised payloads and navigation modules that drones can't fly without.

By embedding itself in the drone value chain as a precision tech partner rather than a mass manufacturer, PDST plays smart.

It's also tapping into the counter-drone segment, using its roots in electronic warfare, another fast-emerging niche.

PDST Financial Performance

If we look at the financial numbers:

PDST Financial Snapshot (2021-25)

Particulars	FY21	FY22	FY23	FY24	FY25
Turnover (In Rs million)	1,430	1,830	2,220	2,540	3,650
Net Profit (In Rs million)	160	270	360	300	610
OPM (%)	31%	29%	26%	21%	27%
EPS in Rs	5.27	6.93	9.25	8.22	15.75

Source: Company Annual Report

The company has shown steady revenue growth with profitability remaining resilient despite margin fluctuations.

A slight dip in OPM from 31% to 21% in FY24 is recovering to 27% in FY25, indicating operational stability.

With EPS nearly tripling over 5 years, the company is quietly scaling into a niche defence tech leader.

Conclusion

Just like a drone ready for lift-off, India's drone sector is hovering on the edge of exponential growth.

As we saw, companies like L&T, BEL, Zen, RattanIndia, and Paras Defence are some of the undervalued players that combine innovations with strategic positioning, making them hidden gems in a buzzing market.

While the potential is high, investors must stay cautious of regulatory shifts, execution risks, and evolving tech landscapes. The engines are on; it's just a matter of when they take off.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...