3 Stocks, One Sector, Billions in Backing: Why FIIs Are Doubling Down on Defence

Mumbai | June 16 – For years, India’s defence sector was more geopolitics than growth — a black box of budgets, delayed orders, and limited transparency. But in 2025, that narrative has flipped.

Defence production is projected to touch ₹1.75 trillion this year. Exports have surged to a record ₹23,622 crore. And for the first time, global investors are treating the sector not as a policy playground — but as a serious wealth creator.

FIIs, known for their timing and due diligence, aren’t just observing this shift. They’re participating — quietly, but decisively. In the June 2025 quarter, foreign institutional investors raised stakes in three defence companies. It’s not a coincidence — it’s conviction.

Let’s decode the signals behind their choices.

1. Apollo Micro Systems: 

   If you missed Apollo Micro Systems in 2024, you’re not alone. The company wasn’t on most radars — until FIIs increased their holding from 0.93% to 6.58% in just one quarter. That’s a 5.65% jump, signalling strong institutional conviction.

   Apollo builds critical systems for India’s defence, space, and aerospace sectors. Its client list reads like a who’s who: DRDO, ISRO, HAL, Bharat Dynamics, Indian Armed Forces — and private sector giants like Adani and L&T.

   Why it’s getting attention:

   • Q4FY25 revenue up 20% YoY to ₹162 crore
   • Net profit rose 8% to ₹14 crore — despite ongoing capex
   • Current order book of ₹615 crore, aiming to triple by FY26
   • Capex of ₹300+ crore, with two new units scaling production

   Management expects 45–50% CAGR in standalone revenue and improved margins in FY26. For FIIs, it’s a classic India growth story — backed by policy tailwinds and operational momentum.

2. Paras Defence & Space Technologies: 

   Paras Defence & Space Tech saw its FII stake rise from 3.6% to 5.12% in the same quarter. It’s not about scale — it’s about tech.

   Paras specialises in high-precision components for missiles, satellites, drones — verticals that demand deep R&D, regulatory approval, and high entry barriers. That’s likely why ISRO and DRDO continue to tap Paras for mission-critical projects.

   What’s working in its favour:

   • Steady order wins across core defence tech
   • Expected double-digit revenue and PAT growth in FY26
   • Indigenous IP and design capabilities under “Make in India”

   It’s still a mid-cap play, but FIIs see long-term optionality. Paras isn’t just a manufacturer — it’s becoming a specialised defence innovator.

3. Data Patterns India Ltd: 

   FII stake in Data Patterns India rose from 8.14% to 9.98% in the June quarter — a near 1.84% increase in an already institution-heavy cap table.

   The company designs subsystems for radars, missiles, satellites, and avionics. It has strong visibility through long-term contracts with defence heavyweights like HAL, ISRO, and other government agencies.

   What’s drawing capital:

   • Strong net profit and margin performance
   • Pipeline visibility backed by execution capability
   • Trades near 52-week highs, but with growth support

   Unlike its peers, Data Patterns plays in a segment where margin protection meets recurring revenue — a sweet spot during macro uncertainty.

What FIIs Know That You Should Too

This isn’t about short-term earnings or budget announcements. It’s about structural shifts. India is positioning itself not just as a defence buyer, but as a defence exporter. With manufacturing scale, global partnerships, and rising R&D spend, the narrative is changing — and FIIs are aligning early.

Key drivers:

• Defence market projected to hit $26.3 billion by 2030
• Apollo guiding for 45–50% CAGR
• Sector backed by policy support + export growth
• Global supply chains are shifting — and India is a net beneficiary

Retail investors often chase momentum after the institutions move. This time, the breadcrumbs are fresh — and the trail leads to some of India’s most strategic companies.

Bottom line:

Three stocks. One sector. And billions in smart money already flowing in. India’s defence sector isn’t just a geopolitical narrative anymore — it’s becoming an investment megatrend. Whether you’re building for growth, stability, or strategic exposure, the signals are hard to ignore.

The question isn’t whether defence will grow. It’s whether your portfolio is positioned before the rest of the market catches on.