Best Defence Stocks in March 2025: Hindustan Aeronautics, Bharat Dynamics and More- Based on 5-Year CAGR

As per the Global Power Index, India ranks fourth in military strength with a firepower score of 0.0979, where 0.0 represents a perfect score. The Indian government has set a defence production target of US$ 25 billion by 2025, including US$ 5 billion from exports. As one of the world’s largest defence spenders, India has allocated US$ 74.8 billion (₹ 6.21 lakh crore) for defence in its budget, accounting for 13.04% of the total budget. This marks a 4.72% increase from the 2023-24 budget and an 18.35% rise from 2022-23.

In 2022, India’s military expenditure stood at US$ 81.4 billion, making it the fourth highest globally, with a 6% increase from the previous year.

For FY 2023-24, India’s defence production was valued at ₹1,27,265 crore (US$ 15.37 billion), with public sector undertakings (PSUs) contributing ₹74,434 crore (US$ 8.99 billion).

This article highlights the top defence stocks in India for March 2025, selected based on their best 5-year CAGR performance.

Best Defence Stocks in March 2025- Based on 5-Year CAGR

Note: The best defence stocks list here is as of February 25, 2025. The stocks are sorted based on the 5Y CAGR. 

Overview of the Defence Stocks in India 

1. Nibe Ltd

Founded in 2005, Nibe Ltd specialises in producing key components for the defence sector, electric vehicles (EVs), and software development. The company is involved in fabricating and machining defence industry parts, assembling EV components, and developing innovative products through its EV division and the BVM R&D Foundation.

In the December 2024 quarter, Nibe Ltd reported a revenue of ₹138.88 crore and a net profit of ₹2.82 crore. This compares to ₹127.22 crore in revenue and ₹9.40 crore in net profit in the September 2024 quarter.

Key metrics:

• Earning per Share (EPS): ₹24.57
• Return On Equity (ROE): 14.92%

2. Sika Interplant Systems Ltd

Sika Interplant Systems Ltd is an engineering-driven company catering to India’s Aerospace, Defence, Space, and Automotive industries. Its core operations include engineered projects and systems, interconnect solutions, electrical module integration, MRO (maintenance, repair, and overhaul) services, and value-added distribution. 

For the quarter ended December 2024, Sika Interplant Systems Ltd reported a revenue of ₹37.98 crore and a net profit of ₹6.63 crore. This marks an increase from the September 2024 quarter, where revenue stood at ₹33.24 crore, and net profit was ₹6.03 crore. 

Key metrics:

• EPS: ₹56.73
• ROE: 21.87%

3. Hindustan Aeronautics

Hindustan Aeronautics specialises in the production of aircraft and helicopters, along with offering repair and maintenance services. By FY24, its order book had grown to ₹94,000 crore, compared to ₹82,000 crore in FY22, with significant new orders anticipated in FY25.

In the quarter ending December 2024, Hindustan Aeronautics reported a revenue of ₹6,956.93 crore and a net profit of ₹1,432.60 crore. This compares to ₹5,976.55 crore in revenue and ₹1,490.36 crore in net profit in the September 2024 quarter.

Key metrics:

• EPS: ₹129.35
• ROE: 27.83%

4. Bharat Dynamics Limited

Bharat Dynamics Limited (BDL) is a Government of India enterprise specialising in the production of guided missiles and defence equipment. BDL manufactures and supplies guided missiles, underwater weapons, and airborne defence systems for the Indian Armed Forces. 

For the quarter ended December 2024, Bharat Dynamics Limited (BDL) reported a revenue of ₹832.14 crore and a net profit of ₹147.13 crore. This marks an increase from the September 2024 quarter, where revenue stood at ₹544.77 crore, and net profit was ₹122.53 crore. 

Key metrics:

• EPS: ₹15.43
• ROE: 15.16%

Best Defence Stocks in March 2025- Based on Market Cap

Note: The best defence stocks list here is as of February 25, 2025. The stocks are sorted based on the market cap. 

Best Defence Stocks in March 2025- Based on Net Profit Margin

Note: The best defence stocks list here is as of February 25, 2025. The stocks are sorted based on the net profit margin. 

Key Things to Keep in Mind Before Investing in Defence Stocks

• Technological Advancements

India’s defence sector is rapidly evolving with innovations in advanced technology. Investors should focus on companies that actively invest in research and development (R&D) to stay ahead of industry trends.

• Impact of Geopolitical Risks

Defence stocks are influenced by global events such as border tensions, conflicts, and shifting government policies. These factors can impact the sector’s stability and profitability.

• Government Policies and Regulations

The defence sector is heavily regulated, with policies governing procurement, licensing, and foreign direct investment (FDI). Investors should assess how these policies impact a company’s growth potential.

• Rising Defence Budget

India’s increasing defence expenditure signals strong growth potential for the sector. Companies aligned with government spending on equipment, technology, and exports are well-positioned for expansion.

Tips for Investing in Defence Stocks

• Understand the Sector: Stay updated on government policies, defence budgets, and emerging technologies.
• Analyse Financial Performance: Invest in companies with strong balance sheets, consistent earnings, and stable long-term growth.
• Monitor Global Events: Assess how geopolitical tensions and defence trends impact stock prices.
• Seek Expert Advice: Consult a financial professional to align investments with your risk tolerance and goals.

Risks Associated with Defence Stocks

• Geopolitical Instability: Border conflicts or international tensions can cause volatility in stock prices.
• Policy Shifts: Changes in government priorities or budgets may affect future growth prospects.
• Regulatory Challenges: Stricter compliance measures can impact operations and profitability.
• Dependence on Large Contracts: Defence companies often rely on major government contracts, making them vulnerable to delays or cancellations.

Future Outlook for India’s Defence Sector

• Strong Government Support: The government’s commitment to investing ₹6 lakh crore in the sector will drive expansion.
• Technological Innovation: Growth in AI, drones, and smart weaponry will enhance industry competitiveness.
• Foreign Investments & Partnerships: Increased FDI and collaborations with global firms are strengthening the sector.
• Export Growth: India’s rising presence in the global defence market offers long-term opportunities for domestic manufacturers.

Conclusion

Investing in defence stocks requires careful evaluation of a company’s financial health, growth potential, and risk factors. Understanding the complexities of the sector and seeking expert advice can help investors make informed decisions in this dynamic industry.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.