Rs 20 lakh crore approved in defence deals — but when will the money actually flow?
Kotak Institutional Equities estimates that around Rs 7 lakh crore in fresh orders could be awarded during 2027–29 as procurement approvals turn into contracts, translating into actual business for companies.
India has approved defence purchases worth more than Rs 20 lakh crore since 2024, opening up a major business opportunity for military equipment makers. But an approval is not the same as a confirmed order. For companies and investors, the major question is how soon these proposed purchases will turn into signed contracts—and when they will start generating revenue and profits. Kotak Institutional Equities, in its October 26 report, estimates that around Rs 7 lakh crore of new orders could materialise over 2027–29 as approvals convert into contracts.
Its assessment draws a distinction between the value of procurement cleared in principle and the business that companies can actually add to their order books. The latest addition is a Defence Acquisition Council (DAC) package worth approximately Rs 2.12 lakh crore, covering the Army, Navy and Air Force. Kotak describes it as the largest DAC approval of 2027 so far, taking approvals in the financial year to about Rs 3.74 lakh crore.
Yet the brokerage expects orders from this tranche to accrue largely in 2028–30, rather than translate into an immediate earnings boost. 63 percentage points Approval is the starting point, not the final order The key distinction is between Acceptance of Necessity, or AoN, and a procurement contract. AoN is the first in-principle approval in the defence acquisition process. It establishes the requirement for a purchase, but it is not a signed order awarded to a supplier.
“AoN is the first, in-principle approval in the DAP cycle, with RFP-to-contract typically running a 1-2-year lag,” Kotak said. RFP refers to the request for proposal issued as part of the procurement process. That gap matters when assessing the sector’s financial prospects. A large approval expands the pool of potential business, but companies still need to secure contracts before the opportunity becomes an order-book addition.
“We see limited near-term P&L impact, with order accrual from this tranche concentrated in 2028-30E,” the brokerage said. In other words, Kotak does not expect the latest announcement to produce a significant immediate improvement in company profits. 4 billion aerospace metals market Rs 7 lakh crore forecast is not a simple conversion ratio Kotak’s estimate of Rs 7 lakh crore in new orders over 2027–29 offers a measure of the business it expects to emerge as approvals progress.
“With FYTD27 AoNs at ~Rs3.7 tn and cumulative AoNs since 2024 crossing ~Rs20 tn, we continue to estimate ~Rs7 tn of new orders over 2027-29E as these convert,” the report said. The two figures should not be interpreted as a simple conversion percentage. The Rs 20 lakh crore figure represents cumulative approvals since 2024, while the Rs 7 lakh crore estimate covers expected new orders over 2027–29.
Their time periods differ and the report does not provide a proposal-by-proposal reconciliation between them. The forecast nevertheless puts the focus on conversion i.e., how much approved procurement moves into signed business, and how quickly. Latest package shifts attention towards drones and air defence The October approvals also show a change in the type of equipment attracting procurement interest.
Unlike September’s package, which Kotak describes as more heavily weighted towards land mobility, the latest tranche places greater emphasis on unmanned systems, counter-drone equipment, short-range air defence and helicopters. It also includes major indigenous naval platforms. For the Army, the proposals include high-mobility vehicles, self-propelled tracked guns, light multi-role helicopters, very short-range air defence systems, platform-based counter-drone systems, surveillance UAVs and long-range kamikaze drones.
Naval approvals include an active offboard decoy system and major naval platforms. For the Air Force, the package covers special utility helicopters, air defence systems, weapons and a mobile X-band Doppler weather radar system for forward areas. The spending opportunity is therefore spread across several manufacturing segments. It is not limited to aircraft and warships: electronics, surveillance systems, missiles and unmanned technologies also feature prominently.
35 lakh cr naval push: 2 stocks to watch as India targets 200 warships Domestic industry has a large share—but allocations remain unclear About 82% of the latest package’s proposed procurement value is earmarked for domestic industry, according to Kotak. This gives Indian manufacturers a substantial potential role in the acquisition programme. However, the report does not assign a contract value to each potential beneficiary.
Its company mapping identifies businesses that could participate in the procurement categories; it does not establish that they have won orders. The distinction is particularly important in shipbuilding. Kotak identifies Mazagon Dock, Garden Reach Shipbuilders & Engineers, Cochin Shipyard, Goa Shipyard and L&T as potential participants in the naval opportunity. But the identities of the major naval platforms have not been disclosed, limiting visibility on which companies could secure the work.
BEL has broad exposure; HAL has two helicopter opportunities Bharat Electronics has the widest exposure across the latest procurement categories, in Kotak’s assessment. The report links BEL to gunshot response systems, counter-drone systems, integrated surveillance and strike systems, active offboard decoys, air defence and weather radar. Hindustan Aeronautics is identified as the natural contender for two helicopter programmes: light multi-role helicopters for the Army and Air Force, and special utility helicopters for the Air Force.
Bharat Dynamics is positioned to benefit from very short-range air defence systems and Air Force weapons procurement. The unmanned-systems opportunity extends to Solar Industries, Adani Defence, ideaForge, NewSpace and Tata Advanced Systems. Their eventual financial gains will depend on which programmes proceed and which suppliers secure contracts; the report does not quantify company-specific wins.
A bigger pipeline has not changed Kotak’s stock calls Despite the scale of the approvals, Kotak has retained its earnings estimates and fair values. It maintains ADD ratings on HAL and BEL, and SELL ratings on Mazagon Dock, Cochin Shipyard and Solar Industries. HAL remains its preferred stock in the sector. “We retain our estimates and FVs,” the brokerage said, underlining that the latest procurement announcement has not changed its financial assumptions.
Based on October 26 closing prices, Kotak’s fair value of Rs 5,305 for HAL implied 11% upside, while its Rs 410 fair value for BEL implied 13% upside. For Cochin Shipyard and Solar Industries, its fair values implied downside of 24% and 40%, respectively. These comparisons reflect the report’s reference prices, not subsequent market movements. Kotak's differing stock recommendations show that higher defence spending does not make every company an equally attractive investment.
India’s defence purchase approvals have crossed Rs 20 lakh crore, showing the scale of its planned spending. But Kotak says the next step is crucial: turning these approvals into signed contracts. The brokerage expects around Rs 7 lakh crore in new orders over 2027–29. Orders from the latest Rs 2.12 lakh crore package are expected mainly during 2028–30. Until contracts are awarded and work progresses, these approvals represent potential business—not an immediate boost to company earnings.
