Archive · 8 Oct 2026
Kotak Sees Defence Spending Boosting Q2 Growth, Orders Key
India is spending more money on buying defence equipment.
A brokerage called Kotak says defence spending grew quickly in the first five months of the financial year.
The government has approved many possible purchases, but approval does not mean a company has received an order yet.
Kotak expects Bharat Electronics, Hindustan Aeronautics and Solar Industries to report higher sales in the September quarter.
It expects Solar Industries to have the biggest growth of those three.
Shipbuilders may need new orders to keep their work growing.
Some large defence projects are still waiting for government clearance.
The report says much of the year's budget has not yet been spent, so spending may increase later in the year.
Kotak says India’s defence capital expenditure rose 37% year-on-year in the first five months of FY2026-27, while 31% of the annual budget had been used.
Acceptance of Necessity approvals exceeded Rs 1.6 trillion this year and Rs 18 trillion cumulatively since FY2023-24; approvals may take one to two years to become contracts.
The brokerage expects Q2 revenue growth of about 16% at Bharat Electronics, 14% at Hindustan Aeronautics and 47% at Solar Industries.
Kotak expects flat revenue at Mazagon Dock Shipbuilders and about 11% growth at Cochin Shipyard, with fresh orders important for both.
Potential large programmes awaiting Cabinet Committee on Security clearance include QRSAM, P75I submarines, Next Generation Corvettes and a Cochin Shipyard survey vessel.
- Who
- Kotak, the Indian government, and listed defence and aerospace companies including Bharat Electronics, Hindustan Aeronautics and Solar Industries.
- What
- A brokerage report forecasts Q2 growth for several defence companies amid rising defence capital spending and a large approvals pipeline.
- When
- The report is dated October 4, 2026, and discusses the first five months and September quarter of FY2026-27.
- Where
- India.
- Why
- Higher defence spending and pending defence programmes may support company growth, although conversion of approvals into orders and the timing of large orders remain important.
Growth opportunity
Execution and order risks
Spending and approvals
Growth opportunity
Kotak says defence capex is growing and the large AoN pipeline supports long-term order visibility.
Execution and order risks
Only about 31% of the annual budget had been used in the first five months, and AoN approvals are not the same as signed orders.
Company growth outlook
Growth opportunity
Kotak forecasts healthy Q2 revenue growth for Bharat Electronics, Hindustan Aeronautics and Solar Industries.
Execution and order risks
The report highlights dependencies and uncertainties: Bharat Electronics needs order conversion, Hindustan Aeronautics faces GE engine supply and Tejas Mk1A integration issues, and shipbuilders need fresh orders.
- Defence capex growth
- 37% year-on-year in the first five months of FY2026-27, according to Kotak.
- Annual budget utilized
- About 31% of the full-year defence capital expenditure budget had been used during the period.
- AoN approvals this year
- More than Rs 1.6 trillion.
- Cumulative AoN approvals
- More than Rs 18 trillion since FY2023-24.
- Expected Q2 revenue growth
- Bharat Electronics: about 16%; Hindustan Aeronautics: about 14% to Rs 7,560 crore; Solar Industries: about 47%.
- Solar Industries defence revenue
- Kotak expects a 120% year-on-year increase.
- Order conversion
- Kotak says AoNs typically convert into contracts with a one-to-two-year lag.
- Awaiting CCS clearance
- QRSAM, P75I submarines, Next Generation Corvettes and a survey vessel order for Cochin Shipyard.