Anwani said the industry’s focus is shifting from building manufacturing capacity to developing intellectual property (IP)-led technologies. He expects defence electronics, drones, unmanned aerial vehicles (UAVs) and missile systems to attract higher investment over the next few years, while shipbuilding is also emerging as a key opportunity supported by government orders and policy initiatives.
“The earlier decade was a decade of reform for the system integrators,” Anwani said, adding that the next wave of growth will be driven by modern warfare technologies and higher government support for R&D.
According to Anwani, defence electronics will account for a larger share of future defence platforms as drones and guided missile systems require a greater proportion of electronic components.
“The defence electronics space proportionately is going to increase.”
He said companies such as Bharat Electronics have indicated plans to sustainably increase R&D spending to develop products aligned with changing defence requirements.
Anwani also highlighted a strong order pipeline in shipbuilding, particularly for defence public sector undertakings (DPSUs). He said projects including landing platform docks (LPDs) and submarine programmes, along with incentives for commercial shipbuilding, could create an opportunity pipeline exceeding ₹2 lakh crore.
Anwani said IP-led businesses are likely to benefit more than companies focused only on manufacturing. He noted that India continues to face challenges in accessing certain critical technologies, making indigenous product development increasingly important.
He added that Solar Industries electronics companies could also benefit from export opportunities as global demand for drones, UAVs and missile-related systems increases.
Discussing stock preferences, Anwani said Bharat Electronics remains his preferred listed defence company under coverage. He cited the company’s guidance for around 15% compounded annual growth rate (CAGR) in growth and a healthy order pipeline.
He also identified Solar Industries as an attractive play because of its exposure to defence consumables and unmanned systems.
“I would place my bet on more electronics, where Bharat Electronics is a preference.”
Anwani said several private defence companies are also reporting strong export growth, although valuations across the sector remain elevated. He believes businesses capable of sustaining earnings growth through technology development and R&D investment can continue to justify premium valuations over the next two to three years.
For the full interview, watch the accompanying video
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