Given the robust revenue growth and order flow, economists anticipate that private enterprises would invest between Rs 650 and Rs 700 crore in capital projects this fiscal year.
According to the analysis, operating margins of private defense enterprises are expected to increase by 50–60 basis points due to continued revenue growth, economies of scale, and improved fixed cost absorption.
According to CRISIL, the revenues of 25 private defense enterprises are expected to increase by 20% in FY25 due to increased government investment and initiatives to increase private sector engagement.
The analysts predicted that the firms' sales would reach Rs 13,500 crore in their study dated June 25. This would represent a revenue more than twice as high as what it was in FY21.
According to CRISIL Ratings Director Jayashree Nandakumar, "strong government impetus, including the Atmanirbhar Bharat initiative, Defense Acquisition Policy, and the Defence Production and Export Promotion Strategy, which favour indigenisation and exports, has caused the orderbooks of aerospace and defence companies rated by the agency to swell over the past few fiscals."
Nandakumar said, "Rising from 3.5 times in fiscal 2023 to approximately 4.5 times in fiscal 2025, to approximately Rs 50,000-51,000 crore, order book to operating income is expected to drive revenue growth."
Operating margin growth is anticipated to remain stable this fiscal year, increasing by 50–60 bps annually.
According to the study, "Operating margin is likely to rise 50-60 basis points on ongoing revenue growth, economies of scale & better fixed cost absorption, as well as should remain stable over the medium term, aided by price escalating clauses in contracts."
Analysts anticipate that private enterprises would expand their capabilities in response to the robust revenue growth in the market, which will raise the need for working capital. They calculated that significant inventories and receivables of around 230 and 120 days, respectively, may cause gross current assets to rise from "the already high" level of 450–500 days on average.
"Players may undertake capital expenditure (capex) of Rs 650-700 crore this fiscal being able to grow their existing capacities by 12-14% and require a supplementary Rs 600-700 crore to meet the incremental working capital expenses," said Sajesh K V, Associate Director, CRISIL Ratings. Nonetheless, solid credit profiles are anticipated to be maintained by robust balance sheets, robust profitability, and judicious financing.
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