Defence sector poised to experience CAGR of 13 per cent from FY23 to FY30: Jefferies

The anticipated growth in the domestic defence expenditure from FY24-30 is set to shape India's defence sector's trajectory significantly. According to a report by Jefferies, the sector anticipates a visible 13% industry Compound Annual Growth Rate (CAGR) from FY23 to FY30, with an estimated domestic defence opportunity ranging between US$ 100-120 billion over the next 5-6 years. Despite India ranking among the top three defence spenders globally, its defence expenditure in CY22 amounted to 10% of that of the United States and 27% of China's. However, India's coastline and land area dimensions closely match those of the US and China, indicating the substantial potential for growth and investment in its defence sector. The focus on indigenization is expected to drive double-digit growth in domestic defence spending.

Furthermore, export defence opportunities are projected to witness a commendable 21% CAGR from FY23 to FY30, with India's defence exports surging 16-fold from FY17 to FY24, reaching US$ 3 billion. Projections suggest this figure could ascend to US$ 7 billion by FY30, aligning with the government's target of achieving US$ 6 billion by FY29E. Data Patterns emerges as a frontrunner in the sector, boasting in-house technology and an anticipated 30%+ Earnings Per Share (EPS) CAGR. Similarly, HAL, renowned for its blend of steady service income and OEM manufacturing growth, anticipates a medium-term EPS CAGR of 22% from FY24E to FY30E. Bharat Electronics (BEL), a market leader in domestic defence electronics, is well-positioned to capitalize on the steady defence spend trajectory, with 70-75% of its revenues from the navy and army. Despite certain risks, such as technology obsolescence and management bandwidth constraints, India's defence sector appears poised for exponential growth, driven by prudent strategies and robust government support, fostering economic and strategic advancements in the foreseeable future.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.