Indian Navy taps Kirloskar Oil Engines for game-changing indigenous marine engine project worth Rs 270cr

Kirloskar Oil Engines Limited has secured a landmark order from the Indian Navy for the indigenous design and development of a 6MW medium speed marine diesel engine. The project falls under the Ministry of Defence’s Make-I initiative, a key element of India‘s broader strategy to indigenise critical defence technologies and reduce dependency on foreign imports. The contract, sanctioned on April 2, 2025, represents a significant milestone for Kirloskar Oil Engines, which has been selected as the development partner for one of the most ambitious naval propulsion programs undertaken by the Government of India in recent years.

Under this project, Kirloskar Oil Engines will design and develop medium speed engines scalable from 3MW to 10MW entirely in-house, to be deployed for both main propulsion and power generation onboard Indian Navy and Indian Coast Guard vessels. The development will take place with substantial financial support from the Government of India, which will fund 70% of the ₹270 crore estimated cost. The engines are expected to feature over 50% indigenous content, showcasing India’s growing engineering and manufacturing capabilities in the marine defence segment.

Why is this defence engine project significant for India’s naval self-reliance?

The project stands as a powerful symbol of the Government of India’s ongoing push toward Aatmanirbharta, or self-reliance, in the defence sector. Presently, the majority of marine diesel engines used by the Indian Navy and Coast Guard are imported from global manufacturers, often at significant cost and with strategic vulnerabilities in terms of spare parts, servicing, and long-term sustainability. By creating an indigenous engine platform tailored to the needs of the Indian Navy, the country not only enhances its strategic autonomy but also builds critical know-how that can be leveraged for future shipbuilding and defence initiatives.

The Ministry of Defence’s Make-I category under the Defence Acquisition Procedure (DAP) specifically supports industry-led design and development projects that aim to build cutting-edge solutions within India. This project with Kirloskar Oil Engines has been greenlit under that framework, further cementing its importance in the nation’s indigenisation roadmap.

Industry experts observe that marine propulsion technology remains one of the last frontiers where India has been largely dependent on imports. The current initiative marks a pivot toward reducing that reliance, particularly for mid-range applications in naval and coastal defence operations.

How is Kirloskar Oil Engines positioned to deliver on this project?

Kirloskar Oil Engines brings to the table more than 75 years of engineering excellence in internal combustion engines and power generation systems. The company’s extensive manufacturing infrastructure, R&D capability, and proven experience in designing engines across a broad power range (3kW to 10MW) make it a strong candidate for this defence-grade undertaking. Its leadership in both diesel and alternative fuel engines for industrial, agricultural, and construction sectors has translated into robust systems thinking and innovation capacity.

Kirloskar’s portfolio includes engines for construction equipment, firefighting systems, railways, and mining applications, all of which require rugged, reliable and efficient performance. The company has also shown a commitment to sustainability by developing engines compatible with alternative fuels such as ethanol, methanol, biodiesel, natural gas, and even hydrogen. This adaptability and forward-thinking approach reflect the technological strength necessary for a project of this scale and complexity.

Notably, the design and development work for the 6MW marine engine will be handled entirely in-house by Kirloskar’s R&D teams. This aligns with the Make-I project requirements and ensures that intellectual property and critical engineering knowledge remain within Indian borders.

What does this project mean for the Indian Navy and defence manufacturing?

For the Indian Navy, the upcoming engine represents not just a new hardware capability, but a shift toward strategic control over its propulsion systems. Indigenous design implies that engines can be customised for specific operational needs, including performance in varied maritime conditions, integration with next-generation ship platforms, and long-term serviceability with local suppliers.

This control is particularly crucial as India ramps up its maritime security presence in the Indo-Pacific region. With growing emphasis on deterrence, mobility, and self-sustaining naval platforms, the ability to produce mission-critical components domestically has never been more vital.

Moreover, for the broader defence manufacturing ecosystem, this project is likely to create a ripple effect. It may trigger upstream and downstream investments in component manufacturing, testing infrastructure, and precision engineering. This could eventually lead to the emergence of a self-sustaining industrial base for marine propulsion systems in India.

What have company executives and government officials said about this collaboration?

At the official signing event held on April 2, 2025, the agreement was witnessed by key figures from the Indian defence and industrial sectors. Shri Sanjeev Kumar, IAS, Secretary (Defence Production), and Vice Admiral Krishna Swaminathan, Vice Chief of the Naval Staff, represented the Government of India and the Indian Navy, respectively. Kirloskar Oil Engines was represented by senior executives including Head of Industrial Business Vinod Menon, Chief Financial Officer Sachin Kejriwal, Marine and Defence Business Head Sanjay Mujumdar, and Marine Segment Leader Najeeb Rahman.

Kirloskar Oil Engines Managing Director Gauri Kirloskar described the contract as a proud moment for the company, reinforcing its long-standing commitment to the “India First” philosophy. She attributed the success to KOEL’s strong technical and R&D base and expressed confidence in delivering a world-class product to the Indian Navy.

Her statement emphasised that this project is not only a business opportunity but also a chance to contribute meaningfully to national defence and technological independence.

What is the stock market sentiment surrounding Kirloskar Oil Engines?

Kirloskar Oil Engines’ stock has seen renewed investor interest following the announcement of this major defence contract. As of April 2, 2025, the company’s share price closed at ₹729.20, reflecting a modest gain of 0.63% over the previous session. However, the broader performance tells a more nuanced story—over the past three months, the stock has declined nearly 30%, and it is down about 17.9% on a year-to-date basis. From a 52-week high of ₹1,450.00 reached in July 2024, the stock had corrected significantly, touching a low of ₹544.15 in February 2025.

This recent defence order has helped stabilise market sentiment and could mark the beginning of a recovery trend if execution and milestones are met on time. Analysts suggest the new order positions KOEL strategically within India’s growing defence-industrial ecosystem, which could lead to longer-term valuation rerating if more orders follow.

From a valuation perspective, the stock currently trades at a Price-to-Earnings (P/E) ratio of 20.89 and a Price-to-Book (P/B) ratio of 3.97. These figures indicate that while the stock is not undervalued, it offers fair pricing relative to its earnings and assets.

Financially, the company has maintained healthy metrics. For the fiscal year ending March 31, 2024, KOEL reported consolidated revenues of ₹5,926.96 crore and a net profit of ₹441.87 crore. In the quarter ending December 2024, the firm posted revenue of ₹1,464.31 crore and net profit of ₹71.30 crore, reflecting operational stability.

Given these fundamentals and the strategic nature of its latest contract, many market watchers recommend a ‘Hold’ or ‘Buy’ stance on the stock. Investors bullish on India’s defence indigenisation theme may find KOEL well-positioned for medium- to long-term value creation. However, potential investors are advised to monitor execution risks and margin pressures in the industrial engines segment amid fluctuating input costs.

What long-term impact could this engine program have on India’s marine engine manufacturing sector?

In the longer term, the successful execution of this program could unlock new opportunities for Kirloskar Oil Engines and similar companies in both the defence and commercial marine markets. The ability to produce 3MW to 10MW marine engines indigenously may open the door for exports to friendly nations seeking cost-effective alternatives to expensive Western systems. It could also pave the way for public-private partnerships in shipbuilding, where propulsion remains a key input cost and technical constraint.

As India continues to strengthen its blue-water navy capabilities, having a homegrown marine engine technology stack will be essential to reducing lifecycle costs, increasing operational flexibility, and reinforcing national pride. In parallel, the project has the potential to spur innovation, generate high-skilled employment, and attract investments in defence-adjacent sectors such as advanced materials, control systems, and maritime electronics.

The Kirloskar Oil Engines–Indian Navy collaboration is, therefore, far more than a single contract. It is a strategic move toward reshaping the contours of India’s maritime defence and manufacturing landscape in the decade ahead.