HAL's Q2 Profit Rises 16% to ₹1,936 Crore on 15% Revenue Growth, While Bharat Dynamics' Sales Jump 45% but Profit Slips

India's two largest listed defence manufacturers reported strong revenue growth in the September quarter, reflecting the government's push to equip the armed forces with domestically built aircraft and missiles, though their profits told contrasting stories.

Hindustan Aeronautics (HAL), the state-owned maker of fighter jets, helicopters and aircraft engines, reported a consolidated net profit of ₹1,936 crore for the July-September quarter, the second quarter of the 2026-27 financial year, up 16% from ₹1,669 crore a year earlier, according to Upstox, citing results announced on Thursday, November 12. Revenue rose 15% to ₹7,613 crore from ₹6,629 crore.

Bharat Dynamics (BDL), which makes missiles and related systems, reported revenue of ₹1,664 crore, up 45% year-on-year, but its net profit fell 15% to ₹183 crore from ₹216 crore, according to Upstox.

HAL's steady growth

HAL's results were in line with its guidance for revenue growth of 10% to 12% in the 2026-27 financial year, according to CompoundingAI. In the first quarter, the company's standalone revenue rose 14.44% to ₹5,515 crore and its standalone profit rose 14.77% to ₹1,581 crore. The second quarter's revenue of ₹7,613 crore represents a strong sequential increase, reflecting the typical pattern in which HAL's deliveries accelerate through the financial year.

The company has guided for an operating EBITDA margin of 30% to 31% for the year.

A massive order book

HAL's long-term prospects rest on its order book, which stood at ₹2,54,538 crore at the end of the 2025-26 financial year, up 34% from ₹1,89,302 crore at the start of that year, according to CompoundingAI. Management has guided for about ₹90,000 crore of additional orders over two years.

Major contracts include orders for the Tejas Mk1A light combat aircraft, light combat helicopters, advanced light helicopters and the upgrade of existing aircraft. The Defence Acquisition Council has also granted in-principle approval, known as acceptance of necessity, for proposals worth about ₹1.1 lakh crore, including advanced light helicopters for the Army.

The Tejas delivery challenge

The most closely watched issue for HAL has been the delivery of the Tejas Mk1A fighter jets to the Indian Air Force. The programme has faced delays, partly because of slow supplies of F404 engines from General Electric. As of September 18, HAL had received 10 GE engines and prepared 27 airframes, according to CompoundingAI.

First-batch deliveries have also reportedly been held up by pending testing of the aircraft's AESA radar and missile integration. HAL has guided for 15 to 20 Tejas Mk1A deliveries in the 2026-27 financial year, with the upper end dependent on receiving about 20 engines. HAL has said it will impose liquidated damages on GE for late deliveries.

The Indian Air Force needs the new fighters urgently, as it retires older aircraft and its squadron strength falls below its sanctioned level.

Bharat Dynamics: growth without margin

Bharat Dynamics' 45% revenue jump reflects stronger execution of its order book, which includes surface-to-air missiles such as the Akash, anti-tank guided missiles and torpedoes. However, the decline in profit suggests that costs rose faster than revenue, possibly because of a change in the mix of products delivered or higher material costs.

Defence manufacturers' margins can vary significantly from quarter to quarter depending on which contracts are being executed, so a single quarter's profit decline does not necessarily indicate a lasting trend.

Other defence results

Astra Microwave Products, which makes radio frequency and microwave components for defence and space applications, reported a 113.72% rise in profit to ₹51 crore and a 22.47% rise in revenue to ₹263 crore, according to Upstox. Hitachi Energy India, while not a defence company, reported a 63.5% jump in revenue to ₹2,996.5 crore, reflecting strong demand for power transmission equipment.

The self-reliance push

India's defence manufacturers have benefited from the government's push for self-reliance in defence, known as Atmanirbhar Bharat. The government has published lists of items that must be procured from domestic manufacturers, increased the share of the defence capital budget reserved for domestic procurement and encouraged private companies and startups to enter the sector.

Defence exports have also grown, reaching record levels in recent years, as Indian companies sell missiles, radars, ammunition and other equipment to friendly countries.

Investor interest in defence

Indian defence stocks have been among the strongest performers on the stock market over the past few years, as investors bet on long-term growth driven by rising defence budgets, large order books and the self-reliance push. Valuations of companies such as HAL, Bharat Electronics, Bharat Dynamics and Mazagon Dock have risen sharply, reflecting high expectations.

Geopolitical tensions, including conflicts in the Middle East and Europe and India's own security challenges, have reinforced the case for higher defence spending globally.

The risks

High valuations leave defence stocks vulnerable to disappointment. Delays in deliveries, such as those affecting the Tejas programme, can affect revenue recognition and investor sentiment. Defence companies also depend heavily on a single customer, the Indian government, and on the timing of contracts and payments.

Supply chain dependencies, such as HAL's reliance on GE for engines, highlight the gaps that remain in India's defence industrial base. India is working to develop its own jet engines, including through a partnership with France's Safran, but these efforts will take years.

The private sector's rise

While state-owned companies such as HAL and Bharat Dynamics dominate India's defence production, private companies are playing a growing role. Tata Advanced Systems, Larsen & Toubro, Bharat Forge, Adani Defence and Mahindra Defence are among those building aircraft components, artillery, armoured vehicles, drones and ammunition, often in partnership with foreign manufacturers.

Startups have also entered the sector, supported by the Innovations for Defence Excellence (iDEX) programme. Greater private participation could increase competition, accelerate innovation and expand India's capacity to meet its defence needs.

For long-term investors, the key question is whether the strong revenue growth seen this quarter can be sustained as large orders move into production and delivery.

What comes next

Investors will watch HAL's progress on Tejas Mk1A deliveries, engine supplies from GE and new orders from the Defence Acquisition Council. For Bharat Dynamics, the focus will be on margin recovery and order execution. With a combined order book worth several lakh crore rupees, India's defence manufacturers have strong visibility over future revenue, but their ability to deliver on time will determine whether they meet investors' high expectations.