India's aerospace and defence manufacturing sector is at a pivotal juncture. A combination of rising defence budgets, a strong government push for self-reliance (Atmanirbhar Bharat), and ambitious export goals is creating a significant growth runway for domestic companies. While large public sector undertakings have already seen substantial investor interest, the next wave of opportunity is emerging further down the value chain.
The Rise of Specialised Aerospace Players
A new cohort of small and mid-sized Indian firms is steadily building critical expertise in areas like aerospace electronics, precision manufacturing, and complex systems integration. These companies may not dominate headlines, but they occupy essential niches in major aircraft and defence platform programs. With improving order visibility and the potential for steady, long-term compounding, they warrant close attention from investors with a multi-year horizon.
Here is a detailed look at three such aerospace-focused stocks, based on an analysis by Equitymaster, that are worth tracking for your 2026 investment watchlist.
Astra Microwave Products Ltd: Mastering RF and Microwave Systems
Astra Microwave Products Ltd operates at the high-precision end of electronics manufacturing. The company specialises in radio frequency (RF) and microwave systems crucial for defence, aerospace, and space applications. It has successfully climbed the value chain, evolving from a component supplier to a builder of complex subsystems and integrated solutions.
Its aerospace and space electronics division designs and supplies RF subsystems used in airborne radars, electronic warfare systems, and satellite payloads. Financially, the company reported a year-over-year revenue growth of approximately 7% for the first half of FY26. Its operating margins improved to around 20.6% in H1 FY26, up from 18.8% in the previous year, driven by a favourable project mix and cost control.
Management has reaffirmed its revenue guidance of ₹1,150 crore to ₹1,200 crore for the current fiscal year. Looking ahead to 2026-27 and 2027-28, the company aims to scale execution in key programs, with gross margins expected to remain in the 45-50% range. Capacity expansion will be funded primarily through internal accruals.
Data Patterns (India) Ltd: The Mission-Critical Systems Expert
Data Patterns (India) Ltd is entrenched in the high-complexity segment of defence and aerospace electronics. The company's strength lies in the end-to-end design, development, testing, and manufacturing of mission-critical systems, with a reputation built on engineering depth.
Its aerospace portfolio is extensive, covering airborne radars, electronic warfare suites, avionics, and communication platforms for fighter aircraft, helicopters, and space missions. For the fiscal year 2024-25, the company delivered impressive 36% year-on-year revenue growth, while maintaining robust operating margins of around 39%.
The company's order pipeline remains strong, with confirmed inflows of about ₹900 crore and more contracts anticipated. Management structurally guides EBITDA margins to remain in the 35% to 40% range. Like its peers, Data Patterns focuses on internal funding for product development and infrastructure scaling.
Unimech Aerospace and Manufacturing Ltd: Precision Tooling Specialist
Unimech Aerospace and Manufacturing Ltd operates in the precision manufacturing space, supplying essential tooling, assemblies, and engineered systems for aircraft production and maintenance. Its business model focuses on high-mix, low-volume manufacturing.
Aerospace tooling for aero-engines and airframes forms the core of its revenue. In FY 2024-25, the company's revenue grew by 16% year-on-year, with operating margins holding steady at approximately 38%, despite investments in capacity and approvals.
Management has acknowledged that earlier revenue and margin guidance has been challenged by tariff-related disruptions and slower order conversion. While no new top-line target was set, the company expects to surpass last year's revenue, albeit with somewhat lower margins. To navigate near-term pressures, Unimech is establishing a free trade warehousing zone and optimising its supply chain for non-US customers.
Investment Outlook and Key Considerations
Even in a market where valuations are often rich, companies with solid engineering foundations and a track record of disciplined execution offer a measure of resilience. The aerospace and defence sector is characterised by long order cycles, high entry barriers, and mission-critical products, which reward quality and patience over rapid, unchecked expansion.
Investors must remain selective. Not every company in the defence ecosystem will benefit equally from the sectoral tailwinds. The key is to distinguish between firms building durable, competitive capabilities and those merely riding a short-term order wave. A focus on balance sheet strength, execution history, and valuation discipline is crucial to separate genuine opportunity from market noise. In a sector where growth unfolds over years, not quarters, these fundamentals remain the most reliable tools for long-term wealth creation.
Disclaimer: This article is for informational purposes only. It is not a stock recommendation and should not be treated as such. This analysis is based on a report from Equitymaster.
