Defence Stocks Surge as India Approves ₹62,000 Crore Tejas Mark 1A Deal for IAF
Share this article:
In a significant boost to India’s indigenous defence capabilities, the Indian government has greenlit a ₹62,000 crore contract for the acquisition of 97 Light Combat Aircraft (LCA) Tejas Mark 1A fighter jets for the Indian Air Force (IAF), announced on August 19, 2025. This landmark deal, awarded to Hindustan Aeronautics Limited (HAL), has put defence stocks , including HAL, Bharat Electronics Limited (BEL), and others, in the spotlight, as investors anticipate robust growth in India’s aerospace and defence sector. The order is set to enhance the IAF’s operational strength while advancing the nation’s self-reliance goals under the Atmanirbhar Bharat and Make in India initiatives.
The approval, finalized during a high-level meeting, marks the second major order for the Tejas Mark 1A, following an earlier contract for 83 jets valued at approximately ₹48,000 crore. With this new deal, the IAF’s total Tejas Mark 1A fleet will reach 180 aircraft, significantly bolstering its capabilities by replacing the ageing MiG-21 jets, which are nearing retirement. The jets will be manufactured at HAL’s facilities in Bengaluru and Nashik, with a production target of 24 aircraft annually.
The Tejas Mark 1A, an advanced variant of the indigenous light combat aircraft, features over 65% indigenous components, a testament to India’s growing self-sufficiency in defence manufacturing. Key enhancements include:
Prime Minister Narendra Modi, a vocal supporter of HAL’s efforts, recently flew a sortie in a Tejas trainer variant, becoming the first Indian PM to undertake such a mission. His endorsement underscores the government’s commitment to promoting indigenous aerospace capabilities.
The announcement has sparked optimism in the stock market, with HAL and other defence-related companies expected to see heightened investor interest. HAL, the primary beneficiary, is poised for significant growth, with its order book already valued at ₹94,000 crore at the end of FY24. The new Tejas contract, combined with potential future orders for over 200 LCA Mark 2 jets and fifth-generation Advanced Medium Combat Aircraft (AMCA), strengthens HAL’s revenue visibility and market position.
Other defence firms, such as Bharat Electronics Limited (BEL), Bharat Dynamics Limited (BDL), and Cochin Shipyard, are also in focus due to their roles in supplying critical components and systems for the Tejas program and other defence projects. The government’s emphasis on indigenization, with 99% of recent defence acquisitions sourced domestically, has bolstered confidence in these companies. For instance, BEL is expected to benefit from contracts for air defence fire control radars, while companies like Bharat Forge and Mazagon Dock are positioned to gain from related defence orders.
The Tejas Mark 1A deal aligns with India’s broader strategy to modernize its armed forces and reduce reliance on imports. The IAF, currently operating with just 30 fighter squadrons against a required 42, is banking on the Tejas to bridge this gap, especially in light of the high costs of foreign aircraft like the Rafale, which cost ₹59,000 crore for 36 jets. The Tejas, while lighter and less advanced, offers a cost-effective solution with significant potential for large-scale production.
The deal is also expected to have a ripple effect on the economy, creating jobs and fostering innovation within India’s defence ecosystem. HAL’s collaboration with private players, such as Larsen & Toubro (L&T) for wing assemblies, highlights the growing synergy between public and private sectors. This partnership, exemplified by the recent handover of wing assemblies at L&T’s Coimbatore facility, is a step toward decentralizing production and accelerating delivery timelines.
Despite the optimism, challenges remain. HAL has faced delays in delivering the initial 83 Tejas Mark 1A jets, originally scheduled to begin in March 2024, due to production hurdles and the complexities of restarting the supply chain for GE Aerospace’s F404-IN20 engines. The first engine was delivered recently, marking a milestone, but HAL will need to scale up production to meet the ambitious target of 24 jets per year.
Analysts remain cautiously optimistic about defence stocks. While the sector’s fundamentals are strong, with a robust order pipeline and government support, some experts caution that valuations may be stretched. The Nifty India Defence Index, which surged 350% between July 2022 and July 2024, experienced a 38% correction by February 2025, highlighting the need for valuation discipline. Brokerages like Antique Stock Broking maintain “Buy” ratings on HAL (target ₹6,145), BEL (₹381), and others, citing double-digit earnings growth and a strong defence capex outlook.
The Tejas deal is part of a larger wave of defence modernization efforts. Recent approvals by the Defence Acquisition Council (DAC) include ₹1.05 lakh crore for projects like Armoured Recovery Vehicles, Electronic Warfare Systems, and Surface-to-Air Missiles, alongside a ₹26,000 crore contract for 240 aero engines for Su-30 MKI aircraft. These developments, combined with India’s ₹6.81 lakh crore defence budget for FY2026, underscore the government’s commitment to self-reliance and operational readiness.
Disclaimer: Stock investments carry market risks. This article is for informational purposes only and not investment advice.
Details of the Tejas Mark 1A Deal
The approval, finalized during a high-level meeting, marks the second major order for the Tejas Mark 1A, following an earlier contract for 83 jets valued at approximately ₹48,000 crore. With this new deal, the IAF’s total Tejas Mark 1A fleet will reach 180 aircraft, significantly bolstering its capabilities by replacing the ageing MiG-21 jets, which are nearing retirement. The jets will be manufactured at HAL’s facilities in Bengaluru and Nashik, with a production target of 24 aircraft annually.
The Tejas Mark 1A, an advanced variant of the indigenous light combat aircraft, features over 65% indigenous components, a testament to India’s growing self-sufficiency in defence manufacturing. Key enhancements include:
- Advanced Technology: Equipped with Active Electronically Scanned Array (AESA) radar, Beyond Visual Range (BVR) missile capabilities, and an advanced Electronic Warfare (EW) suite for superior combat performance.
- Air-to-Air Refueling: Enhances operational range and mission flexibility.
- Indigenous Supply Chain: Over 250 of the 344 systems in the aircraft are sourced from Indian manufacturers, supporting hundreds of small and medium enterprises (SMEs) across the country.
Prime Minister Narendra Modi, a vocal supporter of HAL’s efforts, recently flew a sortie in a Tejas trainer variant, becoming the first Indian PM to undertake such a mission. His endorsement underscores the government’s commitment to promoting indigenous aerospace capabilities.
Impact on Defence Stocks
The announcement has sparked optimism in the stock market, with HAL and other defence-related companies expected to see heightened investor interest. HAL, the primary beneficiary, is poised for significant growth, with its order book already valued at ₹94,000 crore at the end of FY24. The new Tejas contract, combined with potential future orders for over 200 LCA Mark 2 jets and fifth-generation Advanced Medium Combat Aircraft (AMCA), strengthens HAL’s revenue visibility and market position.
You may also like
- Firefighters battle flame on one of the world's oldest trees
Eleven killed in rain-related incidents in Pakistan's Karachi
A Place in the Sun star says 'we are done' as they make 'emotional' announcement- They believe lies can secure mandate, but this is their misconception: BJP on LoP Gandhi's 'Vote Adhikar Yatra'
- Katie Price reveals only man she's ever truly loved - and it's none of her husbands
Other defence firms, such as Bharat Electronics Limited (BEL), Bharat Dynamics Limited (BDL), and Cochin Shipyard, are also in focus due to their roles in supplying critical components and systems for the Tejas program and other defence projects. The government’s emphasis on indigenization, with 99% of recent defence acquisitions sourced domestically, has bolstered confidence in these companies. For instance, BEL is expected to benefit from contracts for air defence fire control radars, while companies like Bharat Forge and Mazagon Dock are positioned to gain from related defence orders.
Strategic and Economic Implications
The Tejas Mark 1A deal aligns with India’s broader strategy to modernize its armed forces and reduce reliance on imports. The IAF, currently operating with just 30 fighter squadrons against a required 42, is banking on the Tejas to bridge this gap, especially in light of the high costs of foreign aircraft like the Rafale, which cost ₹59,000 crore for 36 jets. The Tejas, while lighter and less advanced, offers a cost-effective solution with significant potential for large-scale production.
The deal is also expected to have a ripple effect on the economy, creating jobs and fostering innovation within India’s defence ecosystem. HAL’s collaboration with private players, such as Larsen & Toubro (L&T) for wing assemblies, highlights the growing synergy between public and private sectors. This partnership, exemplified by the recent handover of wing assemblies at L&T’s Coimbatore facility, is a step toward decentralizing production and accelerating delivery timelines.
Challenges and Outlook
Despite the optimism, challenges remain. HAL has faced delays in delivering the initial 83 Tejas Mark 1A jets, originally scheduled to begin in March 2024, due to production hurdles and the complexities of restarting the supply chain for GE Aerospace’s F404-IN20 engines. The first engine was delivered recently, marking a milestone, but HAL will need to scale up production to meet the ambitious target of 24 jets per year.
Analysts remain cautiously optimistic about defence stocks. While the sector’s fundamentals are strong, with a robust order pipeline and government support, some experts caution that valuations may be stretched. The Nifty India Defence Index, which surged 350% between July 2022 and July 2024, experienced a 38% correction by February 2025, highlighting the need for valuation discipline. Brokerages like Antique Stock Broking maintain “Buy” ratings on HAL (target ₹6,145), BEL (₹381), and others, citing double-digit earnings growth and a strong defence capex outlook.
Broader Defence Sector Momentum
The Tejas deal is part of a larger wave of defence modernization efforts. Recent approvals by the Defence Acquisition Council (DAC) include ₹1.05 lakh crore for projects like Armoured Recovery Vehicles, Electronic Warfare Systems, and Surface-to-Air Missiles, alongside a ₹26,000 crore contract for 240 aero engines for Su-30 MKI aircraft. These developments, combined with India’s ₹6.81 lakh crore defence budget for FY2026, underscore the government’s commitment to self-reliance and operational readiness.
Disclaimer: Stock investments carry market risks. This article is for informational purposes only and not investment advice.
More from our partners
Loving Newspoint? Download the app now
