On September 7, 2026, India's Defence Acquisition Council (DAC) greenlit Acceptance of Necessity (AoN) proposals valued at approximately Rs 1.1 lakh crore. These significant approvals, primarily focused on bolstering domestic defence manufacturing, cover critical procurements for the Indian Army, Navy, and Air Force.
Motilal Oswal Financial Services (MOFSL) has reiterated its positive stance on the defence sector following these announcements. The brokerage highlighted that 98% of the total approvals are earmarked for the Indian industry, aligning with the government's 'Atmanirbhar Bharat' (self-reliant India) initiative in defence.
Boosting 'Atmanirbhar Bharat' in Defence
The latest approvals underscore a sustained government push towards indigenous defence production. MOFSL noted that DAC approvals in the current fiscal year (FY27) have already reached Rs 1.62 lakh crore, contributing to a cumulative Rs 13 lakh crore in approvals for the Indian defence sector from FY25 to date. This expansion significantly broadens the total addressable market for domestic players. Furthermore, government initiatives to open missile production to Indian private players are expected to improve order inflow visibility across the sector.
Key Approvals Across Services
The approved proposals span a wide range of capabilities, enhancing operational readiness and reducing reliance on foreign vendors:
- For the Army: Approvals include chemical, biological, radiological, and nuclear (CBRN) reconnaissance vehicles, high mobility vehicles for logistics and operational support, self-propelled mechanical mine layers, advanced light helicopters for complex terrains, trawl tanks, and the Sarvatra Bridge System.
- For the Navy: Clearances cover Arudhra radars to replace existing air route surveillance radars at Naval Air Stations, alongside the design, development, and procurement of marine gas turbines and a warship propulsion system. This move is specifically aimed at reducing dependence on international suppliers.
- For the Air Force: Multiple proposals were approved to enhance the war-fighting capabilities of fighters, transport aircraft, and helicopters. Additionally, approvals were granted for ground-based multi-purpose jammers for adversary radar countermeasures and the installation of the Defence Forces Secure Access Card system.
Analyst Outlook and Stock Targets
MOFSL maintains its estimates and 'buy' ratings for key defence public sector undertakings (PSUs), citing robust order inflow visibility and the government's strategic focus on domestic manufacturing. The brokerage's stock recommendations include:
- Bharat Electronics (BEL): MOFSL reiterated a 'buy' rating with an unchanged target price of Rs 530, based on 45 times two-year forward earnings. BEL is trading at 42.2x, 36.2x, and 32.2x estimated FY27, FY28, and FY29 earnings per share, respectively.
- Hindustan Aeronautics (HAL): The brokerage maintained a 'buy' rating and an unchanged target price of Rs 5,800, based on the average of DCF and 30 times two-year forward earnings. HAL is trading at 32.4x, 27.0x, and 22.3x estimated FY27, FY28, and FY29 earnings per share.
- Bharat Dynamics (BDL): MOFSL maintained a 'neutral' rating with an unchanged target price of Rs 1,270, based on 42 times two-year forward earnings. BDL is trading at 68.4x, 46.7x, and 37x estimated FY27, FY28, and FY29 earnings per share.
- Astra Microwave Products Ltd: A 'buy' rating was reiterated with an unchanged target price of Rs 1,900, based on 42 times two-year forward earnings.
- Zen Technologies Ltd: MOFSL maintained a 'neutral' rating with an unchanged target price of Rs 1,600, based on 30 times two-year forward earnings.
MOFSL emphasized that the finalization of large tenders for defence PSUs should be keenly watched in the near to medium term, reiterating Bharat Electronics (BEL) as its preferred pick within the sector.