India’s expanding defence market signals strong growth potential: Goldman Sachs

NEW DELHI: India’s aerospace and defence market is set to expand significantly, with rising government approvals reinforcing a larger Total Addressable Market (TAM), according to a report by Goldman Sachs.

The report noted that the Defence Acquisition Council (DAC), on October 23, approved proposals worth Rs 790 billion for the Navy, Army and Air Force, which highlights the government’s continued focus on strengthening defence capabilities. It stated, “India Aerospace & Defence: Rs 790bn worth of AoNs reinforces our belief in increasing TAM (Total Addressable Market)”.

With this approval, the cumulative Acceptance of Necessity (AoN) for FY26 so far stands at Rs 2.5 trillion, surpassing the Rs 2.3 trillion recorded in the entire FY25.

Goldman Sachs said the higher level of approvals points to increasing TAM for the domestic defence sector, providing greater growth opportunities and visibility for companies operating in this space. The report highlighted that a large share of spending is expected to go toward the acquisition of a Landing Platform Dock (LPD), as the current AoNs are heavily weighted toward the Navy.

However, Goldman Sachs expects the benefits to extend across the entire domestic defence ecosystem, particularly among private sector players, which should help sustain earnings momentum. It stated, “We believe the trickle down benefits for the domestic defence ecosystem, particularly the private sector players is likely to keep the earnings momentum intact”.

It also pointed out that the value of AoNs has increased from FY23 compared to the FY13-FY22 period, reflecting a shift toward higher capital spending.

As per the Defense Acquisition Procedure (DAP) 2020, orders are typically placed within two years of AoN issuance, indicating that the capital outlay is likely to rise in the coming years. With AoNs worth Rs 2.5 trillion already issued in FY26, exceeding the previous year’s total, the report expects continued ordering momentum, signaling a robust and expanding TAM for India’s defence industry in the near term. (ANI)