Apollo Microsystems surges 11.6% on IDL Explosives deal, PSU orders, and defence integration push

Apollo Microsystems Limited (NSE: APOLLO) climbed 11.62% to close at ₹130.15 on May 9, 2025, as investors aggressively rotated into defense-aligned midcaps. The rally came amid significant institutional flows linked to India’s evolving military posture under Operation Sindoor and renewed strategic procurement visibility. The company’s ₹107 crore acquisition of IDL Explosives Limited, confirmed DRDO orders, and growing eligibility for large defense contracts have positioned it as one of the most attractive emerging players in the country’s defense manufacturing ecosystem. Over the last month, Apollo’s stock has surged over 38%, pushing it through key resistance levels and attracting heightened institutional scrutiny.

Why Did Apollo Microsystems Stock Surge Over 11%?

The stock’s sharp move on May 9 was driven by a series of interconnected developments. Apollo Microsystems disclosed via exchange filings on April 15 that it had secured orders worth ₹7.52 crore from DRDO, a public sector undertaking, and a private entity, while also being declared the lowest bidder (L1) for orders totaling ₹11.48 crore. These awards reflect Apollo’s strengthening position in India’s public procurement network, particularly for technologies linked to missile and radar systems. According to analysts tracking the stock, the L1 status implies high conversion probability into binding contracts, further adding to the company’s forward revenue visibility for FY25.

This momentum is amplified by Apollo’s involvement in high-priority programs being scaled up under Operation Sindoor, which has intensified military procurement for integrated systems across India’s borders. Market chatter also indicates that Apollo has been shortlisted for upcoming defense electronics programs involving Bharat Electronics Limited (BEL) and Hindustan Aeronautics Limited (HAL), which may serve as anchor contracts for its full-spectrum capability expansion.

How Does the IDL Explosives Deal Transform Apollo’s Defence Portfolio?

On May 5, Apollo’s subsidiary, Apollo Defence Industries Private Limited, executed a share purchase agreement to acquire 100% equity in IDL Explosives Limited for ₹107 crore in an all-cash transaction. IDL, formerly Indian Detonators Ltd, was India’s first explosives manufacturing company and currently operates under the GOCL Corporation umbrella of the Hinduja Group. With a 64-year legacy in high-energy materials, IDL brings extensive manufacturing and export experience in packaged and bulk explosives engineered for both mining and defense use cases.

This acquisition immediately propels Apollo from a defense electronics specialist to a fully integrated original equipment manufacturer (OEM) capable of delivering complete weapons systems. According to Apollo’s Managing Director Karunakar Reddy, the acquisition allows the company to offer end-to-end solutions spanning electronics, arming mechanisms, propellants, warheads, and even autonomous platforms. Reddy added that the move not only enables vertical integration but also mitigates vendor risk and reinforces Apollo’s position in Make in India-linked defense projects. Management commentary emphasized that few companies in India currently possess such end-to-end capabilities across the munitions value chain, making this a strategically transformative deal.

What Are the Financials and Expected FY25 Performance?

Apollo Microsystems has already demonstrated strong operational performance this fiscal. For the third quarter of FY25, the company reported a revenue of ₹148.39 crore, representing a 62.5 percent year-on-year growth. Net profit grew 83.1 percent to ₹18.24 crore during the same period, driven by improved product mix and operating leverage. Analysts now expect Apollo to cross the ₹800 crore revenue mark in FY25, supported by both organic order wins and incremental contribution from IDL Explosives integration beginning in the second half of the year.

Margins are expected to expand meaningfully to 18–20 percent, as the company realises economies of scale, optimises procurement via bulk sourcing, and internalises previously outsourced functions such as warhead component assembly and fuze integration. Cost synergies, coupled with strategic raw material sourcing advantages and control over supply chains, are projected to contribute to sustained EBITDA growth over the next six to eight quarters. Some brokerage firms have already revised their 12-month target prices for Apollo upwards to ₹150–₹170, highlighting the company’s unique positioning within India’s accelerating defence manufacturing push.

What Is Apollo’s Competitive Advantage in the Defence Ecosystem?

Apollo Microsystems now commands a competitive edge owing to its vertically integrated presence across both legacy electronics and now energetic systems. The company is transitioning into a multi-domain player that can deliver entire combat modules, including advanced radar interfaces, missile propulsion units, and complete payload solutions. Through the IDL acquisition, Apollo gains access to CE-certified products, enabling exports to the European Economic Area, along with distribution footholds in high-opportunity markets across East and West Africa, Southeast Asia, and the Middle East.

Apollo’s new product slate also includes UAV-deployable payloads, torpedoes, loitering munitions, naval warheads, and underwater mines, making it a rare full-spectrum supplier in the Indian private defense ecosystem. Additionally, the firm has secured Transfer of Technology (ToT) rights from the DRDO for fuze mechanisms in mini depth charges, exploder systems for naval payloads, and hardware for UAV-launched guided munitions. The product diversity and internalisation of critical IP allow Apollo to pursue complex tenders requiring indigenised and comprehensive in-house development capabilities, which often form the core of PSU-led defense mega projects.

What Broader Trends Are Boosting Defence Stocks in India?

India’s defense sector is currently undergoing a structural transformation, catalysed by rising border tensions, geopolitical uncertainty, and a concerted government focus on self-reliance. The Ministry of Defence recently awarded contracts worth over ₹10,147 crore for area denial munitions and enhanced rockets for the PINAKA system, underscoring the momentum behind artillery-focused modernization. Additionally, the government of Maharashtra has sanctioned a ₹12,780 crore “Anchor Mega Project” under the Defence and Aerospace category, offering long-term incentives to manufacturers like Apollo aligned with this thematic.

Globally, the market for explosives and ammunition is expanding rapidly. The explosives segment alone is forecast to grow at a compound annual growth rate of 8.8 percent, reaching $9.37 billion by 2029. Export demand from Europe and the Middle East is also spiking amid the prolonged Ukraine conflict and heightened instability across West Asia. India has capitalised on this by achieving record defense exports of ₹23,622 crore in FY25, with public sector undertakings contributing ₹8,389 crore of that total—much of it in energetic materials and weapons subsystems. Apollo is now well-positioned to ride this global demand curve.

What Is the Market Sentiment and Institutional Flow?

Investor sentiment toward Apollo Microsystems has turned sharply positive over the past month. The stock’s breakout above key resistance at ₹120 was accompanied by a notable surge in trading volumes, indicating accumulation by institutional investors. Small- and mid-cap defence-focused funds have increased their exposure, viewing Apollo as a high-conviction bet in the Tier-II OEM category. Domestic institutional investors, particularly thematic funds aligned with Make in India, have reportedly participated in recent block trades. Foreign institutional investors are also expected to enter once the IDL Explosives integration begins reflecting in quarterly revenue contributions.

Given the firm’s expanded scale, export visibility, and technology absorption credentials, analysts now view Apollo as a potential consolidation candidate for future PPP-driven joint ventures or classified programs under the Ministry of Defence. The company’s ability to deliver highly reliable, indigenously sourced, and IP-secured systems places it among a shortlist of defense integrators with credible global ambitions.

What Can Investors Expect Going Forward?

Looking ahead, Apollo Microsystems is expected to aggressively participate in upcoming PSU and DRDO tenders, particularly those linked to Operation Sindoor’s ongoing escalation. Analysts believe the IDL acquisition will start contributing materially to topline from Q2 FY26. The company’s expanded infrastructure and capabilities make it a strong contender for Make-II and SPV-led production mandates, which the Indian government is increasingly promoting for mid-sized players.

Management has also hinted at exploring strategic partnerships to scale its export footprint in Europe and Southeast Asia. Given the company’s current growth trajectory, integration progress, and ongoing tender pipeline, market participants anticipate that Apollo may soon graduate from a midcap defense electronics player to a fully recognised Indian Tier-I defense OEM over the next 12 to 18 months.