Paras Defence and Space Technologies surges 20% as institutional interest grows in India’s self-reliant defence push

Paras Defence and Space Technologies Ltd. recorded a remarkable 20% rally on May 16, 2025, closing at ₹1,817.40 per share, as institutional investors flocked to defence-related counters amid India‘s accelerating push for self-reliance in critical military technologies. The surge in investor appetite was underscored by unusually high trading volumes, with more than 77 lakh shares changing hands and the total traded value crossing ₹1,313 crore on the National Stock Exchange. Market participants attributed the move not just to short-term buying momentum, but also to long-term structural tailwinds shaping India’s defence and aerospace sector.

The sharp upswing in Paras Defence’s share price came against the backdrop of a broader rotation into public-sector and defence-linked stocks, driven by optimism surrounding the upcoming Union Budget and its likely emphasis on capital expenditure in domestic military production. Analysts view the stock as one of the most direct beneficiaries of India’s Atmanirbhar Bharat programme, particularly in segments like optoelectronic systems, defence electronics, and unmanned aerial vehicle (UAV) subsystems.

What Is Driving Institutional Interest in Defence Stocks Like Paras Defence?

The rally in Paras Defence shares is emblematic of renewed institutional enthusiasm for domestic defence manufacturing, with foreign and domestic funds realigning portfolios to reflect the changing landscape of India’s industrial policy. The Atmanirbhar Bharat Abhiyan—India’s self-reliance mission—has significantly influenced government procurement patterns, prioritizing local manufacturing and innovation over foreign imports. The Ministry of Defence has repeatedly emphasized its preference for Indian vendors in procurement, particularly in strategically sensitive categories like surveillance payloads, communication systems, and autonomous platforms.

Paras Defence, with its specialized focus on designing, developing, and manufacturing high-precision defence components, is well-positioned to capitalize on these changes. The company’s product suite, including optoelectronics, ruggedised defence computing, and drone subsystems, aligns closely with key procurement needs identified by the Defence Research and Development Organisation (DRDO), Indian Army, Navy, and paramilitary forces. In particular, the company’s supply of gimbals, thermal imaging systems, and avionics modules for tactical and strategic applications has secured recurring interest from defence public sector undertakings and integrators.

How Has Paras Defence Positioned Itself in the Evolving Indian Defence Landscape?

Founded in 2009 and headquartered in Navi Mumbai, Paras Defence and Space Technologies has steadily evolved from a niche optics manufacturer to a vertically integrated defence technology player. The company operates across five key verticals—Defence and Space Optics, Defence Electronics, Heavy Engineering, Electromagnetic Pulse (EMP) Protection, and R&D services—making it one of the few Indian firms with multi-domain capabilities.

Over the past few years, Paras Defence has pursued a two-pronged growth strategy: first, aligning its R&D efforts with emerging military modernization needs; and second, forming strategic partnerships with global defence technology providers to bridge capability gaps. In 2023, the company signed a Memorandum of Understanding (MoU) with Israel-based HevenDrones to co-develop logistics and cargo drone platforms. This joint venture, now operational, is expected to address a critical gap in India’s drone logistics infrastructure, especially for high-altitude military transport.

The partnership has also helped Paras integrate beyond-visual-line-of-sight (BVLOS) navigation and autonomous payload delivery modules into its product portfolio. These enhancements place the company in a competitive position to serve the needs of both civilian and military agencies amid India’s growing emphasis on dual-use drone systems.

What Do Financials and Valuation Metrics Reveal About the Stock’s Upside Potential?

The financial results for Q4 FY25 provided further confirmation of Paras Defence’s operational strength. The company posted a 36% year-on-year growth in net revenue, reaching ₹108.23 crore, while net profit more than doubled to ₹20.76 crore, a 117% increase. Improved operating leverage, combined with higher realization from precision engineering contracts, contributed to an expansion in EBITDA margins.

The robust financial performance has attracted the attention of institutional investors, many of whom now see Paras Defence as a long-term compounder in India’s nascent but high-growth defence manufacturing ecosystem. The stock, currently trading at a P/E ratio of around 65x trailing earnings, might appear expensive on traditional metrics. However, investors are clearly pricing in future earnings visibility, underpinned by a strong order book and capital expenditure cycle momentum.

Brokerages tracking the stock have highlighted that the forward pipeline of government tenders—particularly in surveillance and secure communications—is likely to see accelerated awards in FY26, providing further tailwinds. Analysts at domestic brokerages like ICICI Securities and HDFC Securities expect Paras Defence to benefit from potential ₹30,000 crore+ procurement orders over the next three years, including Make-I and Make-II projects under the Defence Acquisition Procedure (DAP) 2020 framework.

How Are Policy Tailwinds and Budget Expectations Shaping Stock Sentiment?

Sentiment around defence manufacturing stocks has turned significantly bullish in the run-up to the Union Budget, expected in July 2025. With India’s defence capital outlay already crossing ₹1.72 lakh crore in FY25, market expectations are building around a further increase in FY26, especially with general elections now behind and geopolitical tensions rising in the subcontinent.

Defence-sector allocations are expected to focus heavily on indigenous production of UAVs, space-based surveillance, secure communication, and next-generation computing hardware—all domains in which Paras Defence holds either proprietary designs or joint development partnerships. Additionally, new policy announcements around production-linked incentives (PLIs) and defence exports are anticipated to further enhance margins for domestic players.

Institutional flows in recent sessions indicate rising foreign portfolio investor (FPI) interest in stocks with defence exposure. Data from NSDL shows that defence-themed portfolios among foreign mutual funds and pension funds saw net inflows of over ₹3,200 crore in the last three weeks, with Paras Defence among the top five most bought midcaps in the sector.

What Lies Ahead for Paras Defence Investors and the Broader Sector?

Looking forward, Paras Defence is expected to maintain strong earnings momentum, especially as the Indian government continues to push forward with its defence indigenisation agenda. The stock split in a 2:1 ratio and the recently declared dividend of ₹0.50 per equity share for FY25 have been seen by analysts as shareholder-friendly moves, reinforcing confidence in management’s capital allocation discipline.

Moreover, with the defence exports target of $5 billion by 2025 nearing completion, companies like Paras Defence that are well-versed in meeting NATO and international standards could also see increased opportunities abroad. Expansion into Southeast Asia, Eastern Europe, and Africa is already underway, with the company actively bidding for ISR payload contracts and field-ready electronics.

In summary, the sharp rally in Paras Defence and Space Technologies Ltd.’s stock on May 16 was not an isolated market reaction, but rather a reflection of deepening institutional conviction in the structural growth story of Indian defence manufacturing. With policy, procurement, and private capital increasingly converging in this space, Paras Defence appears strategically and operationally well-placed to deliver sustainable long-term returns.