Aerospace & Defense

Private Players Enter Defense Manufacturing with USD 1 Billion Investment

• By Pranali C
• 2025-05-07

India's defense industry is changing as private sector companies take up positions previously held by foreign and state-owned companies. With the help of Production Linked Incentives, loosened FDI regulations (up to 74% under the automatic route), and the creation of Defence Industrial Corridors in Tamil Nadu and Uttar Pradesh, private businesses have raised more than US$1 billion in new funding in FY25 to scale R&D facilities, increase production lines, and create international alliances. In addition to fueling India's drive for independence, this inflow of private investment is establishing the nation as a growing exporter of cutting-edge weapon systems and unmanned platforms, highlighting a new era of strategic autonomy and technological innovation.

Investment Surge Energizes Private Defence Manufacturing

India's defense industry is undergoing a radical change as private companies fill in the voids left by long-standing international suppliers. With exports having increased thirtyfold over the past ten years and domestic manufacturing of military equipment exceeding ₹1.27 lakh crore in FY 24, businesses like Zen Technologies, Tata Advanced Systems, and L&T Defence have come to represent India's drive for independence and innovation. With the help of Production Linked Incentive programs and loosened FDI regulations, private companies raised more than $1 billion in new capital commitments in FY 25 alone to expand their production facilities, research and development facilities, and international alliances. In addition to strengthening India's strategic independence, this influx of private investment is establishing the nation as a growing supplier of cutting-edge weaponry and unmanned platforms.

Private Capital and Policy Push Propel India’s Defence Manufacturing Renaissance

India's transition to private-sector-led defense production is supported by a record ₹1.27 lakh crore in domestic equipment manufacturing for FY 2023–2024; a thirty-fold increase in defense exports to ₹21,083 crore over the previous ten years; and US$1 billion in private capital commitments in FY 2024–2025 under Production Linked Incentives and loosened investment restrictions. With the help of important enablers like the Defence Acquisition Procedure 2020, which permits up to 74% FDI, and the creation of two Defence Industrial Corridors in Tamil Nadu and Uttar Pradesh, where more than 250 Memorandums of Understanding have already been signed, businesses like Zen Technologies, Tata Advanced Systems, and L&T Defence are expanding their R&D, production facilities, and international alliances in order to replace imports and establish India as a developing exporter of unmanned systems and advanced weapons.

HAL’s ₹62,700 Crore LCH Contract Marks Milestone in ‘Atmanirbhar’ Defence Push

On March 28, 2025, the Ministry of Defence signed two significant contracts with Hindustan Aeronautics Limited (HAL) for the production of 156 Light Combat Helicopters (LCH) Prachand valued at ₹62,700 crore (excluding taxes), marking a significant step towards bolstering India's independent defence manufacturing ecosystem. The agreement calls for the Indian Army to get 90 helicopters and the Indian Air Force to induct 66. Deliveries are expected to start in the third year and last for five years. Each LCH, which is intended for high-altitude operations above 5,000 meters, has more than 65% indigenous content from 250 domestic suppliers, mostly MSMEs. It is anticipated to create more than 8,500 skilled jobs, highlighting the critical role that public-private sector cooperation has played in India's defense production boom.