Top 3 Stocks Powering India’s Defence Manufacturing To Keep a Watch on

Synopsis: A leading brokerage believes defence manufacturing in India is entering a new phase, where established players are quietly building revenue streams far beyond what made them famous. Three names are drawing particular attention as this shift unfolds.

India’s defence sector has spent the last few years earning its stripes on order books and execution speed. But brokerages are increasingly asking a different question: which companies are diversifying fastest, and which ones stand to benefit most as procurement policy tilts further toward indigenous design and manufacturing. Kotak Institutional Equities has flagged three companies worth watching heading into FY27 – MTAR Technologies, Zen Technologies, and Astra Microwave Products.

Kotak’s Big Picture on FY27

The brokerage’s thesis isn’t really about bigger contracts, though those matter too. It’s about new business lines starting to pull their own weight alongside legacy operations. Kotak expects demand visibility to stretch two to four years out, helped along by the upcoming Defence Acquisition Procedure (DAP) 2026, which leans heavily toward Indigenously Designed, Developed and Manufactured (IDDM) products. Companies with in-house design capability, in other words, are the ones positioned to gain.

MTAR Technologies: More Than Clean Energy

MTAR has long been viewed through the lens of clean energy, and that business – still roughly 70% of revenue – isn’t going anywhere. The company has reiterated guidance of nearly 80% year-on-year revenue growth to about Rs 1,600 crore in FY2027, with EBITDA margins expected near 24%. With a market cap of Rs.21,671 Crores, the shares of MTAR Technologies closed at Rs.7,045.5 in Friday’s trading session.

What’s changing is everything around it. MTAR has entered AI data-centre infrastructure through a long-term tie-up with Schlumberger, already backed by its first export order – a segment Kotak pegs at Rs 400-500 crore in potential over the next few years. Civil nuclear is scaling up too, with execution timelines expected to shrink and new opportunities emerging from reactor refurbishment work. 

On the defence and aerospace side, MTAR supplies structural assemblies and landing gear components while targeting programmes like the LCA Tejas and AMCA. Working capital discipline has also improved, with net working capital days now below 200.

Zen Technologies: Betting Beyond Simulators

Zen built its name on training simulators, but its next chapter looks different. Management has guided for close to Rs 4,000 crore in cumulative revenue over the next two years, with the Hyperstrike interceptor drone described by Kotak as the company’s “key strategic pivot.” Its anti-drone systems – covering detection, tracking, jamming and hard-kill capability on one platform – remain what the brokerage calls a structural moat, backed by approval from the Ministry of Defence.

Vrishabh, an autonomous ground vehicle for logistics and combat support, adds another layer, while directed energy and laser weapons sit further out as future optionality. With a market cap of Rs.15,746 Crores, the shares of Zen Technologies closed at Rs.1,744 in Friday’s trading session.

Astra Microwave: The Quiet Electronics Play

Astra Microwave doesn’t build platforms – it builds what goes inside them. Radar systems, missile seekers and electronic warfare equipment make up the bulk of its work, with 80-85% of revenue tied to defence and Bharat Electronics as a key customer. Kotak sees the AESA radar opportunity for LCA Tejas as a major long-term driver, with in-house MMIC design forming the company’s core moat. With a market cap of Rs.17,612 Crores, the shares of Astra Microwave closed at Rs.1,855 in Friday’s trading session.

Taken together, these three companies illustrate how India’s defence manufacturing story is broadening beyond order books and execution numbers. Whether it’s MTAR’s push into AI-linked infrastructure and civil nuclear, Zen’s pivot toward anti-drone and autonomous platforms, or Astra Microwave’s quiet dominance in radar and missile electronics, each is building a case for relevance well beyond its original core business.

As DAP 2026 tightens its focus on indigenous design and manufacturing, companies with in-house capabilities look best placed to capture the next leg of growth. For investors tracking India’s defence theme, FY27 could well be the year these emerging bets start showing up in the numbers.

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