Billion-Dollar Defence Boost: Why These 2 Stocks to potentially Ride India's Submarine Wave

India's submarine story is entering a new chapter.

The Navy's current fleet rests on the Kalvari-class, built at Mazagon Dock Shipbuilders (MDL) under the first Project-75 in partnership with France's Naval Group.

Six of these modern Scorpene-variant submarines are now in service or close to induction. This program not only gave India cutting-edge diesel-electric submarines but also helped MDL revive its submarine-building expertise.

Now, the government is ready to go a step further.

On 23 August, the Cabinet Committee on Security cleared negotiations for six new submarines under the long-awaited Project-75(I), to be built with Germany's ThyssenKrupp Marine Systems (TKMS).

What's the Big Shift?

Unlike the Scorpenes, which were built without Air Independent Propulsion (AIP) and remain dependent on diesel generators, the new German boats will come equipped with fuel-cell AIP technology from day one.

TKMS has decades of proven expertise here - their submarines can stay underwater silently for up to two to three weeks at a stretch. For India, this means no waiting for retrofits or untested indigenous systems - the stealth edge is built in.

With a project cost of Rs 700 billion (bn), Project-75(I) isn't just about submarines. It's about a technological leap, a deeper transfer of know-how, and putting Indian shipbuilding firmly on the global map.

After being stuck for over six months, the centre has given clearance to begin negotiations for the deal. At the centre of this landmark project is Mazagon Dock Shipbuilders.

#1 Mazagon Dock Shipbuilders

Mazagon Dock is the only shipyard company to have received Navratna status.

Mazagon Dock Shipbuilders Limited (MDL) is one of India's leading shipbuilding yards, headquartered in Mumbai and operating as a premier government-owned entity under the Ministry of Defence.

Since 1960, MDL has delivered over 805 vessels, including more than 30 warships, from guided-missile destroyers to advanced stealth frigates, and 8 submarines.

It has evolved for more than two centuries into a major industrial complex with advanced shipbuilding and submarine construction capabilities.

• Major Submarine Milestone

  On 9 January 2025, MDL handed over INS Vaghsheer, the sixth and final Scorpene-class submarine under Project-75, completing the series of Kalvari-class boats built in partnership with France's Naval Group.

  The full fleet includes:

  • INS Kalvari
  • INS Khanderi
  • INS Karanj
  • INS Vela
  • INS Vagir
  • INS Vaghsheer

  This achievement underscores MDL's unmatched submarine-building expertise-positioning it perfectly for India's next big naval leap.

• The Next Big Opportunity

  According to the media report, the Ministry of Defence has granted approval to initiate cost negotiations with Germany's TKMS for the construction of six submarines under the Rs 700 bn Project 75(I) initiative.

  According to the reports, negotiations are expected to begin soon, with the final contract likely to be awarded to the Mazagon Dock-Thyssenkrupp consortium around six months after successful completion of the talks.

• Order Book Snapshot

  Mazagon Dock Shipbuilder's Order book as of 31 March 2025, stands at Rs 322.6 bn.

  Out of Mazagon Dock Shipbuilders' total order book, the submarine and heavy engineering division contributes Rs 113.62 bn, accounting for about 35.2% of the total.

  Meanwhile, the shipbuilding division makes up the larger share with Rs 207.28 bn, representing nearly 64.3% of the overall orders.

• A Look at the Financials

  The company's revenue rose 11.4% YoY in Q1 FY26. Meanwhile, net profit declined to Rs 4,193 m in the same period, from Rs 6,659 m a year back.

  The company is nearly debt-free and has shown steady growth over the past few years.

  Particulars	FY21	FY22	FY23	FY24	FY25
  Revenue from operations (Rs in millions)	40,478	57,333	78,272	94,666	114,318.80
  Revenue growth (%)	(-17.5)	41.6	36.5	20.9	20.8
  Net Profit	4,795.70	5,864.70	10,727.20	18,454.30	23,248.80

  Data Source: Mazagon Dock Shipbuilders investor presentation for the FY25

  From FY21 to FY25, its revenue registered a CAGR of around 14%, while profit after tax grew at a much faster pace with a CAGR of nearly 38%.

  It also boasts an impressive 3-year return on equity (ROE) of 32.4% and maintains a healthy dividend payout of 33.5%.

Nuclear Submarine Program

Alongside P-75I, India is also pursuing two nuclear attack submarines (SSNs).

The government is exploring options to fast-track both nuclear and conventional submarine projects, recognising their strategic importance in the region.

The government is accelerating nuclear-powered attack submarine (SSN) programme under Project-77, with two submarines now officially cleared for development.

Eventually, India plans to construct a fleet of six SSNs that can remain underwater for longer durations and travel at higher speeds compared to conventional diesel-electric submarines.

These advanced submarines will be equipped with next-generation weaponry, shifting away from traditional sub-sonic cruise missiles to incorporate supersonic and hypersonic cruise missile systems.

The private sector player that is expected to play a major role, in collaboration with the Navy's Submarine Building Centre is Larsen & Toubro (L&T).

#2 Larsen & Toubro (L&T)

L&T is one of Asia's largest vertically integrated engineering, procurement, and construction companies. The company's operations span across sectors such as power, infrastructure, hydrocarbons and heavy engineering.

L&T PES leverages its three decades of design and manufacturing experience in submarine construction to offer turnkey solutions.

The design and construction processes are CMMI level 3 certified, with dedicated R&D centres for design of platforms and equipment and state-of-the-art submarine production centres at Hazira and Kattupalli.

• The Next Big Opportunity

  This is not L&T's first foray into submarine construction. The company was also involved in building India's Arihant-class submarines, which are designed to carry nuclear missiles.

  With its proven expertise and infrastructure, the government might place its trust in L&T for the next-generation submarines.

  L&T has contributed significantly to the design and manufacture of hulls and pressure compartments for nuclear submarines in the past. For Project-77, the company is expected to build critical components at its dedicated facility in Hazira, Gujarat.

  These subs are expected to carry an evolved version of the BrahMos missile and future hypersonic systems currently under development by DRDO.

• A Look at the Financials

  In Q1 FY26, the company's revenue rose 16% YoY to Rs 63.7 bn, while profit after tax (PAT) rose 30% YoY to Rs 36.2 bn.

  Particulars	FY21	FY22	FY23	FY24	FY25
  Revenue from operations (Rs in millions)	1,359,790	1,565,212	1,833,407	2,211,129	2,557,345
  Revenue growth (%)	(-6.5)	15.1	17.1	20.6	15.7
  Net Profit	46,690	102,911	126,249	155,697	176,874

  Source: Equitymaster

  From FY21 to FY25, its revenue registered a CAGR of around 12%, while profit after tax grew at a CAGR of 11.7%.

Conclusion

With these advancements, the Indian Navy is set to elevate its undersea warfare capabilities, enhancing both strike potential and deterrence across the Indo-Pacific.

The move towards next-generation submarines equipped with stealth features and advanced missile systems underlines India's determination to modernise its naval assets.

This strategic push not only strengthens the country's defence posture but also ensures it remains prepared for emerging security challenges in an increasingly contested maritime domain.

This development will boost sentiment around defence manufacturing stocks.

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