Two small-cap stocks are expanding into India’s defence sector. One reported a 468.7% jump in quarterly profit, while the other saw FY26 profit rise to ₹37 crore. With new defence orders and expanding capabilities, can they sustain this growth?
India’s defence manufacturing ecosystem is gradually expanding, creating opportunities for companies that make precision components for complex applications. As domestic defence production picks up, suppliers with the required technical capabilities and quality certifications could find new avenues for growth. Aircraft systems, drone technology and specialised sub-assemblies are among the areas gaining attention.
Two small-cap companies are making inroads into this space, each with a different approach. One has recently secured orders from organisations in India’s defence sector, while the other is developing components for HAWK and MiG-29 aircraft under orders from Hindustan Aeronautics. Their defence businesses are still evolving, but both have reported encouraging growth in their existing operations. But with new opportunities come questions around execution, profitability and valuations.
Let’s take a closer look at these two stocks and what lies ahead. #1 Omnitech Engineering: ₹3,055-Cr order book and a growing aerospace & defence business Omnitech Engineering (market cap: ₹7,830 crore) manufactures high-precision engineered components and assemblies. It specialises in high-precision machining to tolerances as tight as 5 microns (0.005 mm). Its manufacturing processes span CNC, VMC, and TMC machining, grinding, gear cutting, lapping, laser cutting, cladding, welding, fabrication, and assembly.
FE Stock Insights on WhatsApPGet instant alerts on high-conviction investment themes and fundamental deep dives—direct from Financial Express.Join now Structural Moat: Five-Micron Precision and Tier-1 Energy Partnerships The company’s key clients include Weatherford, Halliburton, SLB, Dover Corporation, Lufkin, Boart Longyear, Oshkosh AeroTech, CEJN, and Donaldson. The company holds Aviation, Space & Defence certifications across its facilities.
It is scaling its presence in the Defence & Aerospace sector. This aligns with its strategy to diversify into higher-margin industrial verticals. Management noted that the entry process into defence and aerospace has been underway for about 1.5 years. Given the extensive documentation, testing, and validation required by defence OEMs, qualification cycles naturally take time. The Aerospace & Defence segment offers higher margins than the current base business.
Order Book & Aerospace Moat: Inside the Defence Pivot The company booked initial defence revenue and trial orders in Q1FY27. This turnover was booked under the 'Others' end-user classification, which accounted for 6.9% of total quarterly revenue. Management projects defence revenue to ramp up over the next one to three years. On October 21, 2026, it received business orders from key organisations within India’s defence sector.
These orders are for the manufacturing of precision-engineered components and sub-assemblies for critical applications in land-based systems and advanced sub-systems. Footprint & Scale: Capacity Reaches 32 Lakh Hours The company operates 3 manufacturing facilities. As of June 30, 2026, its annualised installed machining capacity reached 31.9 lakh hours. It also operates a third-party logistics warehouse in Houston, Texas through its subsidiary, Omnitech Group Inc.
Omnitech serves over 256 global customers across 24 countries. The company generates approximately 82.5% of its total revenue from exports outside of India. Its largest markets include North America (52.5%), Asia (27.0%), India (17.5%) and Europe & the UK (3.0%). Its products are used in industries including energy (49.4%), motion control and automation (24.2%), industrial equipment systems (19.5%) and various other sectors (6.9%).
As of July 31, 2026, Omnitech’s order book stood at over ₹3,055 crore. Based on ₹575 crore in revenue over the preceding 12 months, this order book provides multi-year revenue visibility. Annualised machining capacity rose 20.7% to 32 lakh hours in Q1FY27. This will scale total capacity to 42-43 lakh hours. Commercial production is scheduled to start in FY28. Financial Health: Q1 Net Profit Jumps 468% as Cash Cycle Tightens Omnitech Engineering reported strong financial performance for Q1FY27.
Revenue grew by 61.5% year-on-year to ₹166.6 crore. EBITDA (Earnings Before Interest, Tax, Depreciation, and Amortisation) surged 90.8% to ₹50.6 crore, and the margin expanded to 30.4% from 25.7% in Q1FY26. Consequently, net profit surged 468.7% to ₹29.7 crore. This was driven by a reduction in inventory days to 182 days (vs. 225 days) and receivable days to 119 days (vs. 153 days). Management aims to improve working capital days by another 10% to 20% going forward.
Management targets year-on-year revenue growth of 35% to 40% and EBITDA margins to remain at or above 30%. Omnitech Share Price #2 Millworks Technologies: Aircraft orders and expanding capabilities in defence and drones Millworks Technologies (market cap: ₹1,672 crore) manufactures high-precision machined components, sheet metal parts, and integrated assemblies for critical industrial applications.
It operates under 'build-to-print' and 'build-to-specification' models, offering both full-scale manufacturing and job-work services. Millworks operates across sectors including defence, aerospace, drones, railways, metro rail and semiconductors. The business operates through four manufacturing units. In defence, it has a presence in both component manufacturing and strategic corporate equity investments.
Defence Footprint: Indigenous Drone Firmware and HAL Aircraft Orders It manufactures high-durability machined parts, sheet metal components and sub-assemblies for defence hardware and unmanned aerial systems (drones). Millworks holds an equity stake in Quick Pay Private Limited. Quick Pay has developed AASHVAST, an indigenous firmware solution for Indian Army electronics. This investment creates an institutional anchor for a recurring, high-margin defence electronics business.
On October 21, 2026, the company received two development purchase orders from Hindustan Aeronautics for HAWK and MiG-29 aircraft assemblies. These are flight-critical assemblies for sensitive defence programmes. Specifically, the first order is for manufacturing and supplying oxygen valve assemblies for 'HAWK' aircraft. The second order is for 'surge warning sensor assemblies' for MiG-29 aircraft.
The company is developing this assembly for the RD-33 engine of the MiG-29 fighter jet as part of its engine monitoring system. Additionally, it has signed a Memorandum of Understanding (MoU) with TridenTech Engineering to jointly develop and manufacture internal combustion engines for Unmanned Aerial Vehicles (UAVs). The company has expanded its precision engineering capabilities. This enabled it to scale its revenue by nearly 6.8x to ₹148.8 crore in FY26, up from ₹22.0 crore in FY25.
Financial Trajectory: FY26 Profit Hits ₹37 Crore as Debt Tightens to 0.2x As a result, the operating profit increased from ₹8 crore to ₹52 crore in FY26. Consequently, net profit surged to ₹37 crore from ₹5 crore during the period. Foreign exchange gains of ₹4.4 crore (11.9% of profit) also contributed to the profit increase. The company’s debt-to-equity ratio fell from about 0.4x to 0.2x in FY26.
The company listed this July and thus has a short-term trading history. Nonetheless, its revenue and profit have grown at 338% and 383% CAGR over the last three years. Millworks Share Price Comparative Metrics: Earnings Multiples and Return Ratios Millworks Technologies trades at 45.1 times earnings, below the industry median of 71.5 times. Its ROCE of 81% and ROE of 70% are also unusually high. However, given its recent listing and limited trading history, it would be key to see whether the company can sustain its growth and maintain these return ratios as the business expands.
3 times earnings, more than double its industry median of 32.6 times. Its ROCE of 17.6% and ROE of 18% are relatively modest. The high valuation reflects expectations of continued growth, supported by its strong order book, capacity expansion and entry into the aerospace and defence segment. Valuation Comparison (X)Price-to-Earnings MultipleReturn RatiosCompanyCompanyIndustryROCE (%)ROE (%)Millworks45.171.581.070.0Omnitech75.332.617.618.0Source: Screener.in (Data as of October 23 2026) Going forward, Millworks needs to convert its recent revenue growth into consistent earnings, while Omnitech must ensure that its capacity expansion translates into higher revenue and better returns on capital.
For both companies, execution will be key to justifying their current valuations. Keep these stocks on your watchlist to see how they scale up their defence business. Disclaimer: Note: Throughout this article, we have relied on data from and the company's investor presentation. Only when the data were unavailable did we use an alternative, widely accepted and widely used source of information. This article is meant only to share interesting charts, data points, and thought-provoking opinions.
It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educational purposes only. About the Author: Madhvendra has been deeply immersed in the equity markets for over seven years, combining his passion for investing with his expertise in financial writing. He simplifies complex concepts and shares honest perspectives on startups, listed Indian companies, and macroeconomic trends.
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