Bharat Forge has announced a major breakthrough in the defense sector by securing contracts valued at ₹300 crore for indigenous unmanned systems under emergency procurement procedures. This substantial contract win marks a significant milestone for the company's defense manufacturing capabilities and reinforces its position in India's growing defense ecosystem.

Contract Details and Significance

The contracts secured by Bharat Forge focus on the development and supply of indigenous unmanned systems, highlighting the company's technological advancement in critical defense applications. The emergency procurement route indicates the strategic importance and time-sensitive nature of these defense requirements.

Strategic Impact on Defense Manufacturing

This contract win positions Bharat Forge as a significant contributor to India's defense self-reliance initiatives. The focus on indigenous unmanned systems aligns with the government's emphasis on reducing import dependency and building domestic defense manufacturing capabilities. The emergency procurement classification underscores the critical nature of these systems for national security requirements.

Company's Defense Sector Presence

The ₹300 crore contract award demonstrates Bharat Forge's expanding footprint in the defense sector beyond its traditional automotive and industrial segments. This diversification into high-technology defense applications showcases the company's engineering capabilities and its ability to meet stringent defense specifications and quality standards.

The successful contract acquisition reflects Bharat Forge's commitment to supporting India's defense modernization efforts while contributing to the broader goal of achieving self-sufficiency in critical defense technologies.

Bharat Forge Limited has emerged as a significant player in India's defence manufacturing sector, transforming from a traditional automotive components manufacturer into a diversified industrial conglomerate. The company's defence segment has shown exceptional growth, rising from ₹410 crores in FY23 to ₹1,772 crores in FY25, representing a fundamental shift in its revenue composition.

Strong Financial Performance in Q2FY26

The company delivered robust financial results for Q2FY26, demonstrating consistent growth across key metrics:

The company has achieved impressive long-term performance metrics over the past five years, including a revenue CAGR of 13.00%, profit CAGR of 21.00%, and price CAGR of 20.00%. With a return on equity of 11.60% and return on capital employed of 12.20%, the company maintains a debt-to-equity ratio of 0.71.

Defence Segment Emerges as Growth Driver

Bharat Forge's defence operations, primarily managed through subsidiary Kalyani Strategic Systems Ltd (KSSL), have transformed from prototype development to high-volume manufacturing capabilities. The defence revenue trajectory shows remarkable acceleration:

The company has secured an executable defence order book worth ₹11,000 crores as of January 2026, providing revenue visibility over the next five years. A landmark contract includes the ₹1,662 crore order for 2.55 lakh Close Quarter Battle (CQB) Carbines from the Ministry of Defence, featuring indigenously designed, developed, and manufactured weapons.

Automotive Segment Faces Headwinds

Despite defence growth, the automotive business remains significant, accounting for 53.00% of standalone revenue. The segment is divided between commercial vehicles (35.00%) and passenger vehicles (18.00%). However, the automotive sector experienced challenges in recent periods:

The decline primarily stems from weakness in the U.S. Class-8 truck export market. Industrial segments, including power, oil & gas, construction & mining, rail, and marine applications, contributed 47.00% of standalone revenue in FY25.

Operational Infrastructure and Capacity

The execution of defence contracts is expected to significantly increase capacity utilization at Bharat Forge's defence and aerospace facilities in Khed and Baramati. The company's overseas operations show mixed performance, with European operations maintaining PBILDT margins of 2.00% to 4.00%, while U.S. operations have achieved profitability following the aluminium forging facility ramp-up.

Market Positioning and Valuation

Bharat Forge trades at a market capitalization of ₹68,988.19 crores, with shares closing at ₹1,443.00, down 0.76% from the previous day's close of ₹1,454.10. The company's current P/E ratio stands at 65.30x, significantly higher than the industry average of 29.80x, reflecting market expectations for the defence segment's growth potential.

The defence order book now represents approximately 70.00% of the company's total standalone revenue for FY25, positioning this segment to offset automotive market volatility. The structured nature of defence contracts, with technology co-developed with DRDO, ensures intellectual property retention and margin stability within the company's operations.