India\u2019s defence story has been changing rapidly over the past few years, since the \u201cMake in India\u201d mission was introduced.\u00a0<\/p>\n
What was earlier a market ruled by foreign suppliers is seeing a revolution, with both domestic public and private firms focusing on it.\u00a0<\/p>\n
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The country is creating its own radars, drones, avionics, and even AI-driven combat systems. The news headlines may be focusing on the state-of-the-art fighter jets and missiles, but there is one more story quietly unfolding in the stock market.\u00a0<\/p>\n
Several defence manufacturers in India<\/a> in the last three years have grown multi-fold, showing that their businesses are not only pioneering but financially healthy too.<\/p>\n At the same time, some of these companies have low or slightly elevated EV\/EBITDA ratios, suggesting that the market may not have valued their earnings potential yet.\u00a0<\/p>\n EV\/EBITDA is a financial ratio that shows how a business\u2019s market value (Enterprise Value) is compared to the profit it generates before interest, taxes, depreciation, and amortisation.\u00a0<\/p>\n A company that has consistent growth with a modest valuation has the potential to be a long-term winner, which perhaps most investors have overlooked, especially those investing in AI.<\/p>\n Zeroing in on these stocks<\/strong><\/p>\n We are on a quest to find promising aerospace and defence (A&D) businesses. So, we looked at listed companies with steady growth over the past three years, with low or moderate EV\/EBITDA ratios than their median ratio. Also, these companies must have a segment focusing on new technologies like artificial intelligence (AI), to drive progress in the defence sector.<\/p>\n Based on these filters, three private-sector firms emerged: MTAR Technologies, Paras Defence & Space Technologies, and Avantel Ltd.<\/strong><\/p>\n Let\u2019s dig into each of these companies and find out more about them.\u00a0\u00a0<\/p>\n MTAR Technologies\u2019 Precise Manufacturing With AI<\/strong><\/p>\n Based in Hyderabad, MTAR Technologies<\/a> is among the finest precision engineering companies in India<\/a>. It produces components and equipment for nuclear, space, defence, and clean energy.\u00a0<\/p>\n It also supplies water-lubricated bearings, ball screws, electro-mechanical actuation systems, and ASP assemblies to different sectors. From engines for ISRO rockets to DRDO parts, MTAR Technologies is at the core of India\u2019s advanced-tech engineering system.<\/p>\n With AI-driven quality control and smart manufacturing production processes and global partnerships in clean energy and defense, MTAR is slowly becoming more than a contract manufacturer: it\u2019s becoming a solutions provider in advanced engineering.<\/p>\n Financially, the company has grown consistently. In Q1 FY26, MTAR\u2019s revenues increased to \u20b9157 crore, a YoY growth of 22.11% from \u20b9128 crore in Q1FY25. Net profits during the same period rose to \u20b911 crore from \u20b95 crore, excluding exceptional items, supported by stable margins. It translated to a 147% jump YoY.\u00a0\u00a0<\/p>\n Operating margins remain steady in the 18-19% range, which is strong for a capital-intensive manufacturer. The stock price grew at a CAGR of 4% while the average return on equity (ROE) stands at about 11% <\/strong>over the last three years.\u00a0<\/p>\n These are healthy numbers considering the long-cycle nature of the defence and clean energy businesses.<\/p>\n Is MTAR also attractive from a valuation perspective? The stock trades at a slight premium EV\/EBITDA multiple of 42.25 compared to the industry median of 36.65. It means there\u2019s room for relative re-rating as order books expand and the business grows. However, one should note, that a relatively cheaper valuation does not guarantee a re-rating, as that depends on several other factors too.\u00a0\u00a0<\/p>\n For investors looking at defence manufacturing with a mix of stability and upside potential, MTAR is a strong contender.<\/p>\n Paras Defence & Space Technologies<\/strong><\/p>\n Paras Defence<\/a> is among the leading businesses in the aerospace and defence sectors. It manufactures, designs, develops, and tests engineering products and solutions.\u00a0<\/p>\n If MTAR is about precise engineering, Paras Defence is about optics, electronics, and new-age defence systems.\u00a0<\/p>\n The company builds electromagnetic pulse protection, drone technologies, and space arrangements for DRDO, ISRO, and private space players. It is the only supplier of critical imaging gears, such as large optics and diffractive gratings for space applications.\u00a0<\/p>\n Its PARAS.AI platform offers cutting-edge analytics for drone data and surveillance, while Logic Fruit Technologies, one of its investments, helps strengthen its position in AI-driven embedded systems. It is also working on AI-powered radar and electronic warfare systems to become a leader in the tech space.<\/p>\n According to Screener.in, the financial performance shows a stable rise over the last three years. The sales moved from \u20b984 crore in Q1FY25 to \u20b993 crore in Q1FY26, while net profit improved slightly from \u20b914.11 crore to about \u20b914.27crore during the same period.\u00a0<\/p>\n However, the operating margin was 23% in Q1FY26, compared to 29% the year before. It remains respectable, considering the high R&D expenditure the business needs.\u00a0\u00a0<\/p>\n The stock price grew at a CAGR of 25% over 3 years and the average ROE of 10% over the last three years. It also means the company is still in its growth and investment phase.\u00a0<\/p>\n Its EV\/EBITDA multiple of 53.50 is at a premium compared to the industry median of 36.65. Yet, compared to Bharat Dynamics\u2019s<\/a> 63.8, Apollo Micro System\u2019s<\/a> 76.70, it is lower, suggesting the market for various reasons assigns a lower multiple to the company.\u00a0<\/p>\n For investors looking for exposure to drones, optics, and AI-driven systems, the Paras offers both growth potential and relative undervaluation.\u00a0<\/p>\n Avantel Ltd, the Communication Pillar<\/strong><\/p>\n Avantel Ltd<\/a> may not have the scale of MTAR or Paras yet, but it has quickly become an important player in India\u2019s defence communication ecosystem.\u00a0<\/p>\n Situated in Hyderabad, the company designs, develops, and maintains wireless and satellite communications, digital radios, defence electronic systems, and more.\u00a0<\/p>\n These products are the mainstays of armed forces\u2019 secure communications. A role that is increasingly gaining importance as combat moves to network-centric operations.<\/p>\n Moreover, it has integrated AI enhancements in its radio and satellite communication solutions, especially to process signals and interpret real-time data.\u00a0<\/p>\n With steady orders from DRDO and Bharat Electronics, Avantel has become a vital supplier of native communication technology.<\/p>\n Money-wise, Avantel\u2019s revenue was almost stagnant at 51.91crore in Q1FY26 as compared to Q1FY25. The net profit fell from \u20b97 crore to \u20b93 crore (excluding exceptional items) during the same period.\u00a0 Importantly, the operating margins have stayed robust, at 20.13% during this period.<\/p>\n However, the stock price has grown at a CAGR of 46% over 3 years, while the average return on equity (ROE) has been ~ 31% in the last three years.\u00a0<\/p>\n However, unlike MTAR, Avantel does not trade at a discount. Its EV\/EBITDA multiple at 56.03 is higher than the median of 36.65, showing the market\u2019s confidence and readiness to pay a premium for steady growth.\u00a0<\/p>\n Why you should pay attention<\/strong><\/p>\n India\u2019s defence story is no longer just about jets<\/a> and missiles. It\u2019s about AI drones<\/a>, embedded systems, and precise engineering. And it\u2019s also a story that is quietly reflected in the numbers on the balance sheet.\u00a0<\/p>\n
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