“We believe defence companies in India stand to benefit as the EU defence original equipment manufacturers (OEMs) turn to public and private defence firms to procure components and subsystems. Potential beneficiaries include Bharat Electronics (BHE IN), Hindustan Aeronautics (HNAL IN), Bharat Dynamics (BDL IN), Data Patterns (DATAPATT IN), Zen Technologies (ZEN IN), Paras Defence (PARAS IN), Solar Industries (SOIL IN), Azad Engineering (AZAD IN), Dynamatic Technologies (DYTC IN), and Vem Technologies & SMPP among other not listed names,” Elara Capital noted in its research.
A significant part of the European bloc’s €800-billion (approximately $863 billion) rearmament plan will be allocated to support Ukraine. EU member nations are expected to increase their defence spending by 1.5% of their GDP, which could cumulatively result in €650 billion over the next four years. In addition, the EU has introduced a joint borrowing instrument for EU countries, totalling €150 billion, aimed at ramping up defence capabilities.Europe’s heavy reliance on defence imports, especially the US
Despite being home to only three of the world’s top 15 arms producers, Europe is heavily reliant on defence imports. According to European Commission data, 78% of EU defence procurement has gone outside the bloc since Russia’s invasion of Ukraine in 2022, with 63% of the procurement flowing to the US.
This reliance on foreign suppliers presents a significant opportunity for Indian defence companies.Elara Capital highlights that India is well-positioned to capitalise on this gap, as the EU defence plan is expected to create demand for components, subsystems, and equipment from Indian firms. The EU’s military expenditure, which stood at $588 billion in FY23, is set to grow significantly with the €800-billion commitment.
Experts are of the view that despite having an industrial-military complex, the EU’s push for higher defence spending may not immediately go to the region’s companies. A primary reason is that complex military projects take time to plan and execute. Also, the fragmentation of Europe’s defence industries along national lines means they do not have the scale needed to maximise the benefits of spending.
Quantum Strategy’s David Roche said, “They (EU) want to fund Ukraine and supply it with arms from America, which they can’t replace, and secondly, they want to buy time to build a European military, which will take five or six years, probably longer, as you will need to replace a lot of the software involved in NATO and infrastructure, which we don’t have.”
Advantage Indian defence companies
Indian defence exports have already seen significant growth in recent years, reaching a record ₹210 billion in FY24. The Indian government has set a defence export target of ₹300 billion by FY26, and the EU’s €800-billion defence plan could further accelerate these exports.
| Company | Key product exported or likely to be exported | Exports as a % of FY24 revenue | Stock gains so far this year |
| Bharat Electronics | Radars, Avionics | 4 | -7.28% |
| Hindustan Aeronautics | Helicopter structure, accessories, and avionics | 1 | -18.21% |
| Bharat Dynamics | Astra Missile for Russian platform and Akash Air Defence System | 7 | -6.32% |
| Data Patterns | Radars | 6 | -43.32% |
| Zen Technologies | Anti-Drone Systems, Simulators | 19 | -52.38% |
| Paras Defence | Anti-Drone Systems, Electro-Optics | 16 | -10.51% |
| Solar Industries | MOST MBRL | 40 | -5.10% |
| Azad Engineering | Airfoils, airframes, precision components | 87 | -28.95% |
| Dynamatic Technologies | Hydraulics for airplanes | 54 | -24.02% |
Currently, the top three export destinations for Indian defence products are the US, France, and Armenia. Among the weapons and equipment Indian companies have supplied to these countries are 155mm artillery guns, Akash air defence missiles, Pinaka multi-launch rocket systems, BrahMos missiles, Dornier-228 aircraft, radars, armoured vehicles, fuselage and wings for aircraft and helicopters, bulletproof vests, night vision equipment, and electronics.
