India’s defence sector has been at the center of investor attention in recent years. With the government pushing for self-reliance under the “Atmanirbhar Bharat” initiative, public sector undertakings (PSUs) in defence manufacturing have seen their stocks rally sharply. Among the most prominent are Hindustan Aeronautics Limited (HAL), Bharat Dynamics Limited (BDL), and Mazagon Dock Shipbuilders Limited (MDL). All three companies play very different roles in the defence ecosystem, making them attractive in their own ways. The question, however, is which one of them offers the best potential for returns.
HAL is India’s largest aerospace and defence company and was recently awarded Maharatna status, which gives it greater operational freedom. The company manufactures fighter jets, helicopters, transport aircraft, and engines, and it also works closely with the Indian Space Research Organisation (ISRO). HAL has long-standing collaborations with global giants such as Boeing, Honeywell, and Airbus, which gives it both domestic and export opportunities.
A major development came in 2025, when ISRO transferred the technology for its Small Satellite Launch Vehicle (SSLV) exclusively to HAL. This places the company in a unique position to expand into the growing satellite launch market. HAL’s order book currently stands at about 6.1 times its estimated revenue for the financial year 2025–26, which ensures revenue visibility for several years.
Despite this strong outlook, the company’s most recent results showed mixed trends. In the first quarter of FY26, revenue grew by 10.8 percent compared to last year, but profit after tax declined by 3.7 percent to ₹1,383.8 crore. The profit dip was mainly due to cost pressures and slower execution of some projects. However, the market reaction was positive, with the stock gaining around 3 percent after the results. Analysts believe HAL has the potential to climb to around ₹6,000 per share in the medium term, supported by strong execution and steady order inflows.
BDL is India’s primary manufacturer of missile systems and enjoys a near monopoly in this field. The company produces a range of advanced weapons, including short and medium-range surface-to-air missiles (QRSAM, MRSAM), the Akash NG missile system, anti-tank guided missiles, and torpedoes for the navy. This makes BDL a critical part of India’s defence preparedness.
The company’s order book is about 6.8 times its FY25 revenue, giving it excellent visibility for the coming years. The government’s focus on missile development and export of indigenously developed weapons adds further strength to BDL’s growth story.
Financially, BDL’s most recent quarter was slightly weaker than expected, with revenues and profits not matching analyst estimates. However, this did not dampen market confidence, and the stock has been one of the top performers in the defence sector this year. It gained nearly 5 percent after the results and has doubled from recent lows. For many investors, BDL is seen as a tactical play that can deliver high returns in the short to medium term as missile orders translate into deliveries and revenues.
MDL is India’s leading shipyard for the construction of warships and submarines. It is classified as a Navratna company, which allows it significant independence. The company has delivered several key projects for the Indian Navy and Coast Guard. Among its most important projects are the Nilgiri-class stealth frigates (Project 17A) and the Scorpene-class submarines under Project 75.
In 2025, MDL delivered one of the Nilgiri-class frigates in January and another in July, with more to follow. The company has also taken a major step in global expansion by acquiring a 51 percent stake in Colombo Dockyard in Sri Lanka in a ₹450 crore deal. This acquisition is expected to give MDL an international presence and additional capacity for ship repair and maintenance.
Infrastructure development is another area of focus. MDL is building a new floating dry dock at Nhava, expanding its shipyard basins, and increasing its overall handling capacity. This will allow the company to construct and service much larger vessels in the future. Another significant opportunity is the upcoming Project 75(I), which involves building advanced submarines in collaboration with foreign partners. MDL, through its joint venture with a German company, is now the sole contender for this multi-billion-dollar project.
Despite these positives, the financial results for the first quarter of FY26 were disappointing. Net profit fell by 35 percent year-on-year, mainly due to higher procurement and manpower costs. The stock reacted sharply, dropping around 5 percent after the announcement. While the long-term growth story remains intact, near-term profitability challenges could weigh on investor sentiment.
Between April and June 2025, defence stocks in India saw an extraordinary rally. The Nifty India Defence Index rose by as much as 54 percent during this period. HAL, BDL, and MDL all touched record highs as investors rushed to buy into the sector on the back of increased government spending and rising geopolitical tensions.
However, in July 2025, there was a sharp correction. Many defence stocks fell by 10 to 20 percent, with HAL declining by about 8–9 percent and MDL falling even more. The correction was driven by concerns over high valuations and mixed quarterly results. Analysts have since warned that these stocks are in “overbought” territory and advise investors to accumulate gradually during dips rather than chasing rallies.
HAL, BDL, and MDL each have unique strengths and risks. HAL has a wide-ranging portfolio and strong collaborations, making it a reliable long-term investment. Its earnings dip in the latest quarter was small compared to the overall growth in revenue and order pipeline.
BDL stands out for its dominance in missile systems and strong order visibility. Even though the last quarter was softer than expected, the long-term outlook remains very strong. The stock has already given high returns and could continue to perform well if order execution speeds up.
MDL offers long-term promise through naval projects, infrastructure expansion, and international acquisitions. However, it faces immediate profitability pressures, and investors may need patience to see meaningful gains.
For investors looking at long-term stability and consistent growth, HAL is the strongest candidate. Its diverse product base, global partnerships, and large order book provide a solid foundation. Even with occasional profit fluctuations, HAL remains well positioned for sustainable growth.
For those aiming at high short-to-medium term gains, BDL appears to have the best potential. The company’s near monopoly in missiles, along with a robust order book and government support, make it a likely outperformer once deliveries pick up pace.
MDL, while a crucial player in naval defence, may deliver slower returns in the near future because of cost pressures and execution risks. However, patient investors could benefit significantly if the company successfully executes major projects like Project 75(I) and leverages its Colombo Dockyard acquisition.
India’s defence PSUs remain at the heart of the country’s ambition to become self-reliant in defence manufacturing. HAL represents stability and long-term growth, BDL provides high return potential in the medium term, and MDL offers strategic exposure to naval expansion with some short-term risks.
The choice among them depends on investment goals. A balanced approach could involve holding HAL for safety, BDL for momentum, and MDL for long-term naval opportunities. Together, these three companies form the backbone of India’s defence sector and remain attractive options for investors looking to benefit from the growth of indigenous defence manufacturing.