Defence - Industry Report - 16.09.2021

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2021
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Defense and Space Industry

Report Submitted to Data
Patterns (India) Limited on 16
September 2021
Table of Contents
MACROECONOMIC OVERVIEW ......................................................................................................... 5
Global Economy .......................................................................................................................... 5
Indian Economy ......................................................................................................................... 7
Impact of COVID 19 on Defence and Space Industry ............................................................. 8
GEOPOLITICS ................................................................................................................................... 10
The Global Context ................................................................................................................... 10
The Indian Geopolitical Context .............................................................................................. 15
DEFENCE TRENDS ............................................................................................................................ 17
Proliferation of Unmanned Solutions....................................................................................... 17
New Standards in C4ISR and Network Centric Warfare (NCW) .......................................... 18
Advances in Electronic Warfare (EW) ..................................................................................... 19
Commercial Off the Shelf (COTS) as a New Norm ............................................................... 21
New Frontiers – Space & Cyber .............................................................................................. 21
DEFENCE SPENDING ........................................................................................................................ 22
Global Defence Spending ........................................................................................................ 22
Indian Defence Budget Brief and Forecast ............................................................................. 26
INDIA DEFENCE MODERNISATION PROGRAMMES ......................................................................... 31
INDIGENOUS INDUSTRY GROWTH DRIVERS ................................................................................... 42
Indian Defence Industry Antecedents ..................................................................................... 42
Drivers........................................................................................................................................ 45
GLOBAL & DEFENCE ELECTRONICS MARKET ................................................................................... 57
Global Defence Electronics Market ......................................................................................... 57
Indian Defence Electronics Market.......................................................................................... 60
GLOBAL AND INDIAN SPACE INDUSTRY TRENDS............................................................................. 71
Small Satellites and Mega Constellations............................................................................... 71
Serial Production of Satellites .................................................................................................. 72
Uberization of Ground Stations ............................................................................................... 73
Space System Testing.............................................................................................................. 74
COTS for Space ........................................................................................................................ 75
INDIAN SPACE INDUSTRY ................................................................................................................ 75
Indian Space Evolution............................................................................................................. 75
Indian Space Industry Expenditure and Forecast .................................................................. 76
On-going efforts of ISRO .......................................................................................................... 78
Indian Space Industry Ecosystem ........................................................................................... 82
GLOBAL & INDIAN SPACE ELECTRONICS MARKET ........................................................................... 84
Global Satellite Manufacturing Market Opportunity ............................................................... 84
Indian Satellite Manufacturing Market Opportunity ................................................................ 88
Global Market Opportunity for Ground Stations ..................................................................... 90
Indian Market Opportunity for Ground Stations ...................................................................... 91
Global Market Opportunity for Testing Equipment ................................................................. 91
India Market Opportunity for Testing Equipment ................................................................... 92
KEY INDUSTRY GROWTH DRIVERS .................................................................................................. 93
Atmanirbhar Bharat................................................................................................................... 93
Setting up of NSIL and In-SPACe ........................................................................................... 93
OPPORTUNITIES FOR DATA PATTERNS SPACE PORTFOLIO ............................................................. 94
Satellite Manufacturing ............................................................................................................. 94
Ground Stations ........................................................................................................................ 97
Testing Equipment .................................................................................................................... 97
Global and Domestic Demand for Indian Space Players ...................................................... 97
COMPETITION ANALYSIS................................................................................................................. 99
Competitor Profiles ................................................................................................................. 102
Product Capability Comparison ............................................................................................. 116
Figure 1 - World GDP Growth ....................................................................................................... 6

Figure 2 - India GDP CY 2016-26, as reported by the Indian Monetary Fund (IMF) ................ 7
Figure 3 - Global Power Influences ............................................................................................. 11
Figure 4 - Geopolitics in Asia Pacific .......................................................................................... 12
Figure 5 - The "New Silk Road” Initiative .................................................................................... 12
Figure 6 - Russia's growing impact on global affairs ................................................................. 13
Figure 7 - Geopolitics in Central & South Asia ........................................................................... 14
Figure 8 - Geopolitics in Europe .................................................................................................. 15
Figure 9 - The Security Situation in India ................................................................................... 16
Figure 10 - Unmanned Solution Adoption by Countries ............................................................ 17
Figure 11 - Global C4ISR/ NCW oriented modernisation.......................................................... 19
Figure 12 - New Russian EW Equipment ................................................................................... 20
Figure 13 - Defence programmes with high COTS use ............................................................ 21
Figure 14 - Global Defence Spending CY 2015-2020 ............................................................... 23
Figure 15 - Global Defence Spending Forecast: 2021-2026 .................................................... 25
Figure 16 - Defence Budget Growth FY 2017-2022 .................................................................. 26
Figure 17 - FY 2022 Defence Budget Breakdown ..................................................................... 27
Figure 18 - Capital and Stores Expenditure Growth: FY 2016-FY 2022 ................................. 29
Figure 19 - Capital and Stores Allocation Growth Forecast ...................................................... 31
Figure 20 - The Stages of Evolution of the Indian Defence Industry – 1950 to Current......... 43
Figure 21: The Indian Defence Industry Evolution – 1950 to Current ...................................... 45
Figure 22- Indigenous Defence Industry Drivers ....................................................................... 45
Figure 23 Indian Defence Export Growth .................................................................................. 54
Figure 24 - Global Defence Electronics Market ......................................................................... 60
Figure 25 - India Defence Electronics Market ............................................................................ 61
Figure 26 - India EMP Protection Market ................................................................................... 62
Figure 27 - India Defence Optics Market ................................................................................... 63
Figure 28 Military Radar Market .................................................................................................. 64
Figure 29- India Airborne EW Market ......................................................................................... 65
Figure 30 - Torpedoes Component Market ................................................................................ 67
Figure 31 India Avionics Market .................................................................................................. 69
Figure 32- Ground COMINT/ELINT Market ................................................................................ 70
Figure 33- Global Space Industry Trends, 2021-2030 .............................................................. 71
Figure 34- ISRO's Key Milestones. ............................................................................................. 76
Figure 35 - ISRO's Revenue Expenditure Forecast ................................................................. 77
Figure 36 - Historical and Planned Indian Missions, 2018-2022 .............................................. 78
Figure 37 - Deep Space Missions, Historical and Planned ....................................................... 81
Figure 38 - Indian Space Industry Ecosystem ........................................................................... 82
Figure 39- Global Satellite Manufacturing Market share by User Segment for Mass Class (0-
75Kg), 2021-2030 ......................................................................................................................... 85
Figure 40 - Global Satellite Manufacturing Forecast (Units; No. of satellites), CY 2021-2030
........................................................................................................................................................ 86
Figure 41 - Global Satellite Manufacturing Revenue Forecast (CY 2021-2030)..................... 87
Figure 42: Global Satellite Manufacturing Regional Market Share, CY 2021-2030 ............... 87
Figure 43 - Indian Satellite Manufacturing Forecast (Units; No. of Satellites CY 2021-2030)89
Figure 44 - Indian Satellite Manufacturing Revenue Forecast CY 2021-2030 ........................ 89
Figure 45 - Global Ground Station Equipment Forecast (CY 2021-2030) ............................... 90
Figure 46 - Indian Ground Station Equipment Forecast (CY 2021-2030) ............................... 91
Figure 47 - Global Testing Equipment Revenue Forecast (CY 2021-2030)............................ 92
Figure 48 - Indian Testing Equipment Revenue Forecast (CY 2021-2030) ............................ 92
Figure 49 - Key Industry Drivers for satellite manufacturing, ground station and testing
equipment markets. ...................................................................................................................... 94
Figure 50 - Global Satellite Manufacturing Components Forecast CY 2021-2030) ............... 95
Figure 51 - Indian Satellite Manufacturing Components Forecast (CY 2021-2030) ............... 96
Figure 52 - Indian Defence Suppliers - Anticipated Future Positioning ................................... 99
Figure 53 - Product Capability Comparison of Major Indian Defence Stakeholders ............ 116
Table 1 - World GDP Growth ......................................................................................................... 6

Table 2 - Defence Budget Components Description ................................................................. 28
Table 3 - Indian Air Force Programmes...................................................................................... 35
Table 4 - Indian Navy Programmes ............................................................................................ 39
Table 5 - Indian Army Programmes ............................................................................................ 42
Table 6 - Capital Acquisition Categories in the Defence Acquisition Policy 2020 .................. 49
Table 7 - Features of the Draft Defence Production and Export Policy 2020 ......................... 53
Table 8 - Department of Defence Production Strategy for Exports .......................................... 57
Table 9 - Brief overview of some Global Defence programs .................................................... 59
Table 10 – Programs Driving Indian Defence Electronics Market ............................................ 62
Table 11 – Programs Driving Torpedoes Sensor Market .......................................................... 67
Table 12 - Programs Driving Avionics market ............................................................................ 68
Table 13 - ISRO Planned Programs ........................................................................................... 81
Table 14 - Regulatory Framework and Policies ......................................................................... 84
Table 15 - Financial Data of Indian A&D Companies 1 ........................................................... 100
Table 16 - Financial Data of Indian Companies 2 .................................................................... 101
MACROECONOMIC OVERVIEW
Global Economy
The global economy is expected to bounce back with a growth of 5.6% in 2021,
4.4% in 2022, and 3.3 % in the medium term. However, the recovery remains
unequal with advanced economies making a faster comeback due faster vaccine
rollout. Most advanced economies are expected to regain pre-pandemic per capita
income by 2022, however only one-third of emerging market and developing
economies (EMDEs) are expected to do so.
World Bank released the Global Economic Prospect1 report in Jun 2021 forecasting
a 5.6% increase in the global GDP in 2021, 4.4% in 2022 and 3.3% in the medium
term.
The growth could be higher than projected if there is greater global cooperation on
vaccines which prevents renewed waves of infection and lockdowns. An early control
of the health crisis would also lead to a faster than-expected release of excess
savings by households, higher confidence, and more front-loaded investment
spending by firms.
However, currently it is estimated that the risks to downside are more pronounced
due possibility of additional COVID waves and a stressed financial situation due high
EMDE debt. Other than the pandemic related reasons, other downside risks are
lower than estimated effect of the family support package in US, and a faster
tightening of monetary policy in face of persistent and rising inflation 2.
Many countries have provided large-scale macroeconomic support to alleviate the
economic blow, which has contributed to lifetime highs in most financial markets.
Central banks in advanced economies have cut policy rates and taken other far-
reaching steps to provide liquidity and to maintain investor confidence. In many
emerging markets and developing economies (“EMDEs”), central banks have also
eased monetary policy. The fiscal policy support that has been announced already
far exceeds that enacted during the 2008-09 global financial crisis. The global growth
for the world, the advanced economies and EMDEs at constant prices is set out in
the table below3:
1
https://thedocs.worldbank.org/en/doc/600223300a3685fe68016a484ee867fb-0350012021/related/Global-
Economic-Prospects-June-2021-Highlights-Chapter-1.pdf
2
Source : IMF
3
Source: World Bank
Year World GDP Advanced EMDEs
(% Change) Economies (% Change)
(% Change)
2016 3.3 1.8 4.5
2017 3.8 2.5 4.8
2018 3.6 2.3 4.5
2019 2.8 1.6 3.6
2020 -3.3 -4.7 -2.2
2021 6. 5.1 6.7
2022 4.4 3.6 5
2023 3.5 1.8 4.7
2024 3.4 1.6 4.6
2025 3.3 1.5 4.5
2026 3.3 1.5 4.4
Table 1 - World GDP Growth
Figure 1 - World GDP Growth

Notes: Data for 2016-2020 is actual; data for 2021-2026 is forecasted. Aggregate
growth rates calculated using GDP weights at 2020 constant prices.
After the rebound in 2021, global growth is expected to gradually slow to about 3.3%
into the medium term which is largely due to the post pandemic disruption of supply
chains, and pre-pandemic factors which includes the slower labour growth in
advanced economies and some emerging economies due aging .
Indian Economy
RBI has projected a growth rate of 10.5% for FY 2021-2022. However, World Bank
and IMF forecast GDP growth at 8.3% and 9.5% respectively. The variations arise
from differing estimates impact of the second COVID wave. The economy is
expected to grow at 7% in FY2022-2023, and at 6-6.5% in the medium term.
Figure 2 - India GDP CY 2016-26, as reported by the Indian Monetary Fund (IMF)
Note – The years are in CY; date from 2016-2020 is actual. Data for 2021-2026 is
projection of estimated growth trajectory. Source : IMF
India has made rapid progress in its economy since the 2000s, which resulted in
reducing absolute poverty. It is estimated that more than 90 million people were lifted
out of extreme poverty in the period CY 2011-20154.
Indian economy grew at CAGR of 6.6% between 2012 and 2020 which was the
highest growth globally, however it had started to slow down in the later years
recording a growth of only 4.0 % in 2020. The slow growth was largely attributable to
weakness in the financial sector and lower growth in private consumption. The woes
were compounded by COVID when the implementation of lockdown in Mar 2020
(one of the most stringent lockdowns in the world), brought the economy to a near
halt with rapid decline of both demand and supply. Consequently, there was a
contraction of - 23.9 % in Q1 2020, and - 7.5% in Q2 20205. The gradual opening of
the economy towards the end of 2020 resulted in modest growth of 0.5% in Q3 and
1.6% in Q4 of 2020. For the full FY 2020-2021, contraction was pegged at -7.3%6.
The drastic second wave of COVID led to another series of state level lockdowns,
and as a result the consensus estimate of GDP growth of around 10% in FY 2022
was reduced by ~ -1 % by most economic agencies. RBI had also reduced the GDP
growth forecast from 10.5% to 9.5 % for FY 22 post the second wave, but then
4
https://www.worldbank.org/en/country/india/overview
5
https://www.business-standard.com/article/economy-policy/india-s-gdp-q2-2020-economic-contraction-
narrows-to-7-5-from-23-9-in-q1-120112700855_1.html
6
https://indianexpress.com/article/business/economy/india-q4-january-march-gdp-provisional-estimates-
2020-21-fy21-gross-domestic-product-data-covid-19-surge-7338168/
reverted to earlier estimate of 10.5% in indicating that it does not expect the second
wave to materially affect the growth rate7 due the localised nature of lockdowns.
The actual effect of the second wave can only be discerned in the time to come;
currently the growth forecast for FY 2022 varies between 8.3% as projected by
World Bank8, and 10.5% as projected by RBI; IMF revised the FY 2022 forecast to
9.5% 9. The variations in forecasts are largely due to the difference in estimated
impact of the second wave of COVID-19
For FY 23, the economy is expected to register a growth of ~ 7%, and settling down
to 6-6.5% in the medium term10. The forecast are based on the estimated effect of
second wave, and as of now do not take into account a serious disruption by a
possible third wave of infections. A high caseload in the third wave with another
series of lockdowns could materially affect growth.
Impact of COVID 19 on Defence and Space Industry

The defence and space industry are strategic sectors, and are resilient to economic
impacts. They are largely affected by geo-political situation, political stance and
national strategic plans
Taking due account of the economic forecasts, Frost and Sullivan reiterates that the
economic growth is not the pre-dominant factor which affects strategic sectors such
as Defence and Space.
Defence spending unaffected by COVID impact
Defence spending trends show that its dependencies are multi-faceted, involving
regional security climate, GDP growth, political stance, and equipment
obsolescence; with geopolitics often emerging as the dictating factor when compared
to economic factors. This can be discerned by the year on year increase in global
defence spending by 2.6% to $ 1981 billion in 2020, and an increased spending by
India in arms procurement representing an overspend of 18.6% over the budgeted
capital acquisition amount. The primary reason for the same is increase in geo-
political uncertainty at global and the national level due increasing Chinese
aggression
Worst of supply chain and program disruptions are behind us

Defence Original Equipment Manufacturers (OEMs) faced early disruptions to supply
chain and delivery due the pandemic related lockdowns. The disruptions lead to
delay in delivery schedules of various programs, for e.g., Lockheed Martin delivered
120 F-35s in 2020-2021 which was 21 less than the planned figure of 14111. The
7
https://www.livemint.com/economy/rbi-projects-gdp-growth-at-10-5-for-fy22-11626346834236.html
8
https://www.thehindu.com/business/Economy/india-expected-to-grow-at-83-says-world-
bank/article34762989.ece
9
Source : IMF
10
https://www.worldbank.org/en/country/india/overview
11
https://www.airforcemag.com/lockheed-f-35-production-covid-longer-than-expected/
emergence of second and third waves continues to delay the expected recovery, and
as of today, the actual recovery timeline is still being decided.
Closer home, the sea trial of Indigenous Aircraft Carrier 1 (IAC 1) was delayed due
to the effect of COVID. However, they have now commenced indicating that
programs are getting back on track12.
Most defence OEMs are planning to ramp up production within the next couple of
years to make good on program delays. The ramp up will need to be supported by
the supply chain, which had also suffered from disruptions and cash flow issues in
2020. Going forward, the financial health of defence supply chain constituents is
expected to ease as the smaller companies were supported by larger OEMs and
government initiatives both globally and in India.
Frost estimates that the disruptions will slowly ease out as the global vaccine
program speeds up, and OEMs take concerted measures to scale up production.
The worst of disruption is behind us, and no significant disruptions to production /
cash flow are expected in the future.
The business landscape is changing with governments favoring indigenous supplier
and domestic capability
The protectionism in defence that started manifesting in Europe a decade ago is
becoming more widespread today. Governments want to leverage defence spending
to make positive impacts on their economy, whilst preserving or expanding domestic
manufacturing and its associated jobs. Imports from foreign suppliers may get
deprioritized, creating opportunities for indigenous defence industries. The defence
procurement policy and spending patterns are likely to be modified to obtain more
value from defence budgets. Countries will look at spending the available resources
more efficiently through indigenization (for e.g., India‟s Atmanirbhar defence
structural reforms), diversification of supply chains, and looking at new more cost
effective equipment sources, in order to keep procurement levels commensurate
with achieving technology and platform based tactical advantages. The crisis forced
countries are likely to rethink their procurement strategies by emphasizing more on
standardisation, modular design and its applications, and turning more towards
commercial side technology baselines.
Industry stakeholders must take cognisance of the shifting landscape, and re-think
their competitive strategy to align with domestic policy and offer higher value and
lower lifecycle cost ability to the end users.
Resilience of space market
After initial disruptions in 2020, the global space sector has bounced back strongly in
2021. Q2 2021 saw a record $ 4.5 billion investment in the sector.
12
https://www.newindianexpress.com/nation/2021/aug/08/iac-vikrant-returns-after-successfully-completing-
five-day-maiden-sea-voyage-2341974.html
COVID-19 has been a strong influencing factor for market developments across
sectors and geographies. However, space operations have remained fairly resilient
to the negative impacts of the pandemic. Critical missions have progressed
uninterrupted under special guidelines and safety protocols from government
agencies. The industry has observed delays in project executions by a year or two,
but complete loss of revenue opportunities have been relatively limited. While
lockdown measures may have postponed launches, most contracts have remained
unaffected. Despite the disruption, the number of launches in 2020 increased to 114
which was an increase of ~ 10% over 2019. Over 1200 satellites were launched in
2020. In 2021, there have been 63 launches during first half of the year with 1225
satellites being launched. The exhibited resilience of the space industry is mainly
due to it being accustomed to vulnerabilities and uncertainties (such as weather
conditions delaying launches) before COVID-19.
New investments in the industry have been affected to some extent, as a result of
which some start-ups have had to shut down operations and file for bankruptcy.
However there have also been instances of the investment changing hands. For e.g.,
Softbank‟s exit from OneWeb‟s start-up investment forced it to file bankruptcy initially
however it was later rescued by a conglomerate which included UK government and
Bharti Airtel. The UK government saw merit in the investment to support its post-
Brexit objectives of achieving self-sufficiency in the space domain, while Bharti Airtel
saw appeal in the promise of providing global connectivity. OneWeb, therefore, is
back in the mega-constellations business, aiming to install its constellation by 2022.
Investments in the sector have bounced back strongly in 2021, with Q2 2021
registering a record $ 4.5 Billion13 of new capital. The total capital raised during 2021
is expected to exceed the $9.1 billion raised in 2020.
GEOPOLITICS
The Global Context

China’s expanding military, newfound Russian assertiveness and a receding United
States are driving the formation of new power centres; the scenario remains
escalatory which is expected to keep defence preparedness and spending at the
forefront
13
https://www.cnbc.com/2021/07/14/space-capital-q2-report-shows-record-4point5-billion-invested.html
Figure 3 - Global Power Influences
The geopolitics of the world continues to be governed by a contracting sphere of

influence associated with Western powers and the increasing geopolitical
assertiveness of Russia and China. China‟s military modernisation has taken new
hues over the last decade with a reformed focus on technological superiority and
expanding expeditionary operations. The US Congressional Research Service report
released on July 1, 202114 cites that the People‟s Liberation Army Navy (PLAN) is on
track to have 425 warships by 2030. The PLAN already holds numerical superiority
over the United States (US) as far as naval forces are concerned. While Chinese
island-building activities in the South China Sea is contested by other stakeholders
to the conflict, these stakeholders are also economically dependent on China and
therefore are not willing to risk aggression at the cost of economic linkages. The
Chinese Belt & Road Initiative15, though ostensibly led by economic ambitions, have
undertones of power projection and is seen by major countries as a risk in the
current power calculus. China is also not shying away from open aggression if
necessary, as evidenced by the skirmishes with India in the Pangong Lake area 16.
China‟s clamping down of freedoms in Hong Kong and it‟s encirclement of Taiwan
are viewed by the West as potential threats, and the region is considered a
dangerous flashpoint.
14
https://fas.org/sgp/crs/row/RL33153.pdf
15
https://www.cfr.org/backgrounder/chinas-massive-belt-and-road-initiative
16
https://www.bbc.com/news/world-asia-57234024
Figure 4 - Geopolitics in Asia Pacific
Figure 5 - The "New Silk Road” Initiative
Meanwhile, Russia has evolved from a silent to an overt aggressor, as exemplified

by its takeover of Crimea. Putin‟s recent essay17 on the “oneness of Russian and
Ukrainian people”, veils a possible takeover threat in the future. Russia has also
started taking a more active interest in regional conflicts, having participated directly
in the Syrian conflict. The Syrian conflict theatre witnessed Western equipment
failing when going up against new Russian electronic warfare (EW) equipment,
indicating Russia‟s new found technological superiority in certain segments of
warfare (for example, spectrum warfare and hypersonic weapons). This event
caused a recalibration in Western defence modernisation, accelerating military
spending and refocusing on new technologies to counter new additions to the
17
https://www.atlanticcouncil.org/blogs/ukrainealert/putins-new-ukraine-essay-reflects-imperial-ambitions/
Russian arsenal. Both these nations have also renewed their space programs,
making it more offensive oriented18.
Figure 6 - Russia's growing impact on global affairs
The US reaction to these developments, after Biden took charge, has been primarily
inward focused and two pronged – expand technology intensive “force-multiplier”
capabilities while detaching itself from external conflicts that drained its resources.
The US withdrawal from Iraq and Afghanistan, and the expansion of the US
Department of Defence budget to approximately $ 753 Billion in FY 2021 is in line
with this new foreign policy. However, an exit of the US from these regions could
catalyse regional players such as Turkey and Iran, or even larger powers such as
Russia and China to fill the geopolitical void, exacerbating the security situation in
these two countries. At the same time, the new Biden administration is likely to
pursue a de-escalation policy with Iran, in order to reduce geopolitical tensions in the
region. But by far, the highest risk is still the potential for a Korean conflict that would
initially draw in the United States, China, and Japan but could spill over and involve
many regional and global nations.
The US withdrawal is likely to have negative ramifications on terrorism in

Afghanistan, Iraq and Syria. The Taliban has made a rapid emergence post the
withdrawal of US troops, and has taken over power after seizing Kabul which forced
the President Ashraf Ghani to flee the country 19. The rapid collapse of Afghanistan,
and re-emergence of Taliban will have wide spread effect on regional unrest with a
18
https://foreignpolicy.com/2021/03/31/russia-china-space-war-treaty-demilitarization-
satellites/#:~:text=China%20and%20Russia%20have%20sprinted,unfortunately%2C%20common%20in%20inte
rnational%20diplomacy.
19
https://apnews.com/article/afghanistan-taliban-kabul-bagram-e1ed33fe0c665ee67ba132c51b8e32a5
high possibility of it spreading globally inn dominant areas20 . Though the Islamic
State (IS) has been reduced to a smaller presence in Iraq and Syria, the threat has
evolved into a new form of entrenched insurgency, with targeted local and regional
attacks on weak points21. Terrorism spill overs due to US‟ withdrawal could be felt in
other areas, including Pakistan, South Western China22 and India, and will remain
the major security concern after Chinese and Russian expansionism. The nature of
threats have become manifold, and theatres of war are not restricted to ground, air
and sea anymore. Militarisation of the cyber domain and space – especially by China
and Russia, has driven powers such as the US, UK, India and others to strengthen
cyber resilience and strengthen space based Intelligence, Surveillance,
Reconnaissance (ISR) and offensive capabilities. Security stakeholders in these
countries are increasingly turning towards new technological advances, including
Artificial Intelligence and advances in Command, Control, Communications,
Computers, Intelligence, Surveillance and Reconnaissance (C4ISR) in order to
develop an edge over the adversaries‟ technology.
Figure 7 - Geopolitics in Central & South Asia
In Europe, the approach towards security is becoming more multilateral and

European Union-centric; however, some intra-EU relations are becoming strained
because nations such as Turkey and Hungary have entrenched relationships with
Russia and China. The focus in the region is currently on collaborative defence
projects such as the Future Combat Air System 23 and the European Medium Altitude
Long Endurance (Euro MALE)24 program. Defence budgets in the region are inching
towards the NATO‟s target spending of 2% of a nation‟s GDP, driven mainly by
Russia‟s increasing presence in Eastern Europe. The tempo and scale of NATO
military exercises in the region are also growing; the power projection is expected to
be a deterrent to Russia.
20
https://www.bbc.com/news/world-asia-57933979
21
https://www.voanews.com/middle-east/islamic-state-resilient-ever-iraq-syria
22
https://asia.nikkei.com/Politics/International-relations/As-US-exits-Afghanistan-China-prepares-for-threat-
of-security-void
23
https://www.defensenews.com/global/europe/2021/05/21/fcas-developers-chasing-the-sweet-spot-in-mix-
of-fighter-drone-designs/
24
https://www.airbus.com/newsroom/events/ila-2018/EuroMale.html
Figure 8 - Geopolitics in Europe
2021 presents a world that is rapidly becoming multi-polar through the rise of China
and a potential resurgence of Russia influence in some regions. The threat of
terrorism has not waned and could potentially increase over the next few years; for
countries such as Afghanistan, India and Iraq insurgency will continue to be a
perpetual security concern. As these perpetual threats expand and new technology
based threats emerge, nations are increasingly looking towards the defence industry
to provide a new wave solutions capable of delivering not only traditional tactical
advantages, but spectrum-based, cyber, informational and space-based advantages.
The Indian Geopolitical Context

The Indian subcontinent’s security situation remains in a very precarious state, with
China’s openness to confrontation on the rise and no abatement of terrorism from
Pakistan. The tense geopolitical uncertainty will require increased defence
preparedness
Territorial issues and a history of conflict spanning six wars have made India‟s
borders with Pakistan and China some of the most dangerous flashpoints in
existence today. The presence of such adversaries underscores the mandate for
India to build up of credible, technology-driven military deterrence on both fronts.
Figure 9 - The Security Situation in India
India‟s most pressing problems continue to be terrorism from Pakistan and a

potential flare up with China. The taking over of Afghanistan by Taliban will further
add to the security problems, with likely increase in terrorist‟s attack and cross-
border infiltration. It is pertinent to note her that both China and Pakistan back the
Taliban regime, and are mulling a strategy to recognise the government 25.
2020 witnessed the most violent clash between India and China in decades with
both sides sustaining casualties26. A stalemate followed for the most part, however
de-escalation was later agreed to with Chinese and Indian troops on the southern
and northern shores of Pangong Tso disengaging in unison. Competing claims on
territory along the Line of Actual Control still remain and therefore the region
continues to be unstable. China‟s One Belt One Road (OBOR), though ostensibly a
trade initiative potentially has elements to encircle India and erode its regional
superiority27. China has forged close links with India‟s neighbours such as Sri Lanka,
Nepal and Myanmar through a combination of investment and loans 28. An increasing
Chinese economic presence in these countries could mask or lead to Chinese
intelligence or military activities, for example the Hambantota Port in Sri Lanka,
financed through Chinese investments, could potentially be used as resupply points
for Chinese warships and submarines as the PLAN pursues its plan to field a true
blue-water naval force.
A permanent solution to the Jammu & Kashmir issue is unlikely and relations with
Pakistan will continue to remain strained. Despite repeated commitments to peace
talks by the leaders of India and Pakistan, attacks on the Indian Territory by terrorist
organizations such as Lashkar-e-Toiba (LeT) and Jaish-e-Mohammed (JeM)
continue. As Western powers such as the US have broken away from providing
25
//economictimes.indiatimes.com/news/defence/as-china-pakistan-weigh-recognising-taliban-experts-warn-
long-term-losses-us-ire/articleshow/85533435.cms
26
https://indianexpress.com/article/india/galwan-valley-clash-timeline-india-china-disengagement-7358554/
27
https://www.orfonline.org/expert-speak/from-hedging-states-trump-cards-china-backing-down-south-asia/
28
https://www.thehindu.com/news/international/china-extends-500-million-loan-to-
lanka/article34305277.ece
military supplies to Pakistan; China and Turkey have stepped in to fill the void.
Further a resurgent Taliban, supported by China/ Pakistan, could have serious
security implications for India.
DEFENCE TRENDS
Unmanned systems proliferation, an increasing focus on C4ISR and electronic

warfare (EW), military commercial off the shelf equipment, and militarisation of space
is driving the battlefield. Companies like Data Patterns which have an exclusive
portfolio catering to the above segments will have significant opportunities in the
future
Proliferation of Unmanned Solutions

Unmanned solutions used to be restricted to major superpowers only; now these
solutions are becoming the new norm in warfare
Unmanned solutions are quickly becoming an operational norm in the land, sea and
air domains. Several countries are in the process of modernizing their armed forces
by improving the capability of their dismounted soldiers with improved situational
awareness through a widespread adoption of unmanned solutions for a range of
missions – including ISR, search and destroy and dedicated EW. Countries such as
Turkey and Philippines have successfully demonstrated the use of Unmanned Aerial
Solutions (UAS) for strike missions recently.
Figure 10 - Unmanned Solution Adoption by Countries
Over the past few years, on board capability and configurability of UAS have
expanded to a high degree, with the latest iterations of UAS being multi-mission
capable29. Operators are increasingly exploring formations in which manned
platforms work in tandem with unmanned autonomous and semi-autonomous
29
https://www.ga-asi.com/remotely-piloted-aircraft/predator-c-avenger
platforms (Manned-Unmanned Teaming - MUM-T) to achieve enhanced situational
awareness. Globally, the U.S. Navy recently launched the Sea Hunter30, designed to
travel the oceans for months at a time with no on-board crew, search for enemy
submarines and provide intelligence to naval commanders for better decision-
making. Most new autonomous systems are being developed with cost effectiveness
in mind and therefore a large portion of the technology and sub systems will be
sourced from the commercial sector (which is more mature than the defence sector
in autonomous technologies). The Indian Armed Forces is also expanding its armed
inventory and is currently considering the acquisition of the General Atomics MQ-9
Predator UAS31. However, over time India will have to develop capable in-house
unmanned solutions in order to procure more capability at lower cost.
Unmanned vehicles are becoming increasingly electronics dense and several

companies in the Indian defence sector are well placed to cater to related emerging
requirements for subsystems. This trend is expected to heavily influence the Indian
Armed Forces‟ procurement dynamics and drive opportunities for tier 1, tier 2 and
tier 3 Indian defence companies as procurement, especially for smaller and tactical
Unmanned Aerial Systems, becomes more inward-focused.
New Standards in C4ISR and Network Centric Warfare (NCW)

Decision making in warfare, both at tactical and strategic levels, are increasingly
being driven by information, high speed data transfer and network effects
Effective C3, supported by a reliable network composed of distributed ISR assets is

a capability multiplier for military operations. Such technology was previously an
asset of mostly advanced Western militaries; however, currently many smaller
nations and developing countries are focused on expanding C4ISR and NCW
capabilities. Solutions, which used to be exclusive to advanced nations such as the
US, are becoming ubiquitous today especially in countries such as Turkey, India,
and Saudi Arabia. C4ISR and NCW are prime drivers of future networked soldier
programmes underway in France, Germany, Singapore, Malaysia etc.
30
https://news.usni.org/2020/09/30/navy-to-use-sea-hunter-in-fleet-exercises-as-unmanned-systems-
experimentation-continues
31
https://www.hindustantimes.com/india-news/indian-navy-approaches-defence-ministry-for-predator-
drone-acquisition-101622711168674.html
Figure 11 - Global C4ISR/ NCW oriented modernisation
In India, the progress towards an integrated battlefield network has been slow and
currently put in the backburner because of lack of funds 32. However, C4ISR
upgrades have been happening in batches – through procurement of foreign
equipment such as software defined radios from Israel 33 and also procurement of
ISR equipment such as radar solutions from Indian indigenous companies such Data
Patterns. Moving forward, especially after 2025 when India would have brought
down equipment obsolescence in the forces, a more rapid adoption of C4ISR and
network equipment can be expected. The majority of these requirements will be met
through the indigenous industry, as Indian companies currently have the capability to
build bespoke C4ISR solutions for the Indian Armed Forces.
Advances in Electronic Warfare (EW)

As global forces become increasingly networked, spectrum-denial is taking more
importance as a high reward capability that can blind and overwhelm the enemy’s
operations.
Threat levels stand elevated today because adversaries have much better missile
guidance and electronic warfare (EW) technology than a decade back. Expanding
Russian and Chinese Electronic Warfare capabilities are a concern to several
nations in Eastern Europe and South Asia. Both nations have demonstrated GPS
jamming capabilities over the past few years. Russian jamming capabilities was a
key concern to Western powers during the Syrian conflict as bespoke solutions were
in place to jam GPS signals or spoof Position Navigation and Timing (PNT) markers.
32
https://www.financialexpress.com/defence/battlefield-management-system-a-critical-technology-for-indo-
china-border/1976041/
33
https://www.timesnownews.com/india/article/iaf-to-buy-sdrs-from-israel-to-ensure-secure-
communication-between-fighter-jets/461569
Norway has also been at the receiving end of Russian GPS jamming. Similarly India
is concerned about China‟s expanding spectrum warfare capabilities. Russia and
China both are also focusing on improving their space-based jamming capabilities.
Figure 12 - New Russian EW Equipment
A US Department of Homeland Security (DHS) report34 states that using EMP

weapons is a major part of the Chinese military paradigm. This underscores the
need for EMP protection defence equipment. Most platforms being built today are
EMP hardened through using hardened electronics, faraday shielded construction,
EMP filters and redundant subsystems. In the future, a higher level of EMP
protection that doesn‟t compromise on size and weight parameters of defence
equipment will be sought after.
As most EW and Electronic Counter Measures (ECM) solutions need to be built

bespoke to an operator‟s specifications and requirements to improve effectiveness,
Indian defence stakeholders are turning more towards the indigenous industry.
Indian defence component manufactures are embedded in the supply chains of
Israeli and European defence majors that manufacture EW solutions. Moving
forward, as the role of Indian Defence Public Sector Units (DPSUs) shift towards
platform development and system integration, even more opportunities in the domain
are expected to go to the Indian private defence industry.
34
https://michaelmabee.info/china-emp-threat/
Commercial Off the Shelf (COTS) as a New Norm
Commercial Off the Shelf Components are fast becoming the building blocks of
defence equipment, replacing bespoke components. The advantages of faster
upgrades, plug and play and lower cost as a result of extensive COTS use are being
recognized by major powers globally.
Economic pressures are driving many commercial and governmental operators

within the military toward purchase of COTS products. These products have a
favourable cost-to-performance ratio. Militaries are finding it difficult to improve the
capability of its existing systems by relying solely on evolutionary upgrades achieved
through its standard practices which they were not designed for. Advances in COTS
hardware are thus enabling new opportunities for a hardware support model that
facilitates continuous deployment of war fighting capabilities.
Figure 13 - Defence Programmes Requiring High COTS Use
In India, a new version of the procurement manual35 of DRDO has been unveiled
featuring simplified procedures for involvement of the private sector in various
research and development projects. Measures include exemption of bid security and
performance security of up to Rs 10 lakh (~USD 15000) and not having negotiations
for commercial off-the-shelf (COTS) items/services. There is a continuous
requirement of Commercial Off-The-Shelf (COTS) equipment available globally
including manufactured indigenously for surveillance and communication besides
solutions towards soldier protection and various security related platforms.
New Frontiers – Space & Cyber

The space and cyber domains are being weaponised rapidly, both for ISR and
offensive operations. As militaries pursue digitisation aggressively, their susceptibility
35
https://www.drdo.gov.in/sites/default/files/procurement-manuals-document/PM2020_0.pdf
to cyber-attacks also increases. Budgets towards cyber resiliency and space based
weapon systems are on the rise.
The weaponisation of space is a Cold War era trend that is making resurgence
because Russia and China are shoring up their capabilities in the two
aforementioned areas. Major Powers have responded by devolving separate
budgets towards the space and cyber commands and even setting up dedicated
commands36 for these new theatres. New technological developments, such as small
satellites and cheaper satellite launch services have led to a thriving downstream
business model providing ISR to several segments of customers, including the
military.
As digitisation increases around the world, state and non-state actors are utilising the
technology to spread their influence and presence, as well as wage cyber warfare,
thereby opening up a new front. Cyber-proofing is emerging as a key mandated
requirement among most advanced militaries. The advent of Internet of Things (IoT)
has opened new avenues of infiltration, such as through networked household
devices. The following trends will continue and become more prevalent:
1. A shift in attack methodology from data theft to data manipulation

2. Continuing lack of security skills in the workplace, making companies
increasingly likely targets
3. AI, which will allow for a greater range and variety of attacks
4. Targeting of consumer devices through the IoT.
5. Supply chain attacks as a means of getting to larger companies
MoDs are continually investing in cyber security measures and adding cyber security
requirements to technological developments to meet this growing threat. An example
is the French 2019 new Military Cyber Strategy, with the commander of cyber
defence (COMCYBER) being the head of the French MoD‟s cyber security.
DEFENCE SPENDING
Global Defence Spending
The global defence expenditure is expected to grow to $ 2031 billion by 2025 due
increased geo-political uncertainty even though countries face economic pressures
due to COVID 19 disruption.
The global defence spending rose to $ 1981billion in 2020 37 representing an
increase of 2.6% over 2019 spending. The increase represents that the countries
chose to spend more on defence even when they faced severe economic contraction
due the COVID impact. As noted below, the global defence expenditure has been
36
https://www.npr.org/2019/12/21/790492010/trump-created-the-space-force-heres-what-it-will-do
37
Source: Stockholm International Peace Research Institute (SIPRI). All data in this section has been sourced
form SIPRI
steadily increasing in the last 5 years at a CAGR of ~ 3.6%. As seen later, in this
section the increase has been primarily due to the increased geo-political tension
due Russian annexation of Crimea in 2014, followed by the aggressive actions of
China in the wake of pandemic.
Figure 14 - Global Defence Spending CY 2015-2020

Notes: The figures are based on current USD 2019. Figures for Middle East (ME) are
estimates as noted by SIPRI. The years are calendar years.
The largest defence spender, US, is estimated to have spent $ 778 billion in 2020
which was an increase of 4.4 % over 2019. China, the second largest spender, is
estimated to have spent $252 billion representing an increase of 1.4 % over 2019,
while India was the third largest spender accounting for $ 72.9 billion with an
increase of 2.1% over 2019.
Other notable facets of defence spending in 2020 are38:
 The top 5 spenders; US, China, India, Russia and UK accounted for
62% of the global defence spending. All five countries increased their
spending by 1.9% to 4.4% over 2019.
 The top 15 spenders accounted for 81% of the total global spend; all
the countries in this group increased their defence expenditure over 2019
except Saudi Arabia and Brazil which reduced defence spending.
38
https://sipri.org/sites/default/files/2021-04/fs_2104_milex_0.pdf
 In 2020, thee military expenditure increased by 5.4% in Africa, 4% in
Europe, 3.9% in Americas, and 2.5 % in Asia and Oceania. Middle East (ME)
was the only region which registered a drop of 6.5%39.
 Military expenditure in Africa was estimated at $43.2 billion in 2020,
Algeria, Morocco, and South Africa were the top three spenders in the region.
 Americas spend a cumulative $ 855 billion in 2020 on defence
representing an increase of 3.9% over 2019 US, Canada, and Brazil are the
top three spenders in the region.
 In addition to China and India, Japan ($49.1 billion), South Korea
($45.7 billion) and Australia ($27.5 billion) were the largest military spenders
in the Asia and Oceania region. The region has shown an uptrend since due
rise of China as a global economic and military power which in turn has
influenced the spend by other countries.
 Military spending in Europe was $378 billion; UK, Germany and France
were the highest spenders in the region.
 The combined spend of the countries in ME was $ 143 billion. While
the actual spending decreased, the military burden (military spending as
percentage of GDP) increased due to the economic impact of COVID. The top
three largest spenders in the region are Saudi Arabia, Israel, and Turkey.
The rise in global defence expenditure even in an economic downturn can be

explained by the post-COVID rise in geo-political uncertainty. An examination of the
variables affecting defence budgets shows that its dependencies are multi-faceted,
involving regional security climate, GDP growth, financial deficits, political will and
equipment obsolescence; with geopolitics often emerging as the dictating factor
when compared to economic factors. Though theoretically, the defence expenditure
was expected to decline due the economic downturn, the reality is that the main
drivers of defence spending such as defence postures and geopolitics have only
exacerbated in the recent times.
Rise in geopolitical disputes, such as the on-going flare up between the United
States and China, was the major reason fuelling this increase in spending.
Additionally, Chinese claims of territories in India, the South China Sea and the Asia
Pacific (APAC) increased insecurity among the affected nations. Russia‟s
involvement in Crimea and Libya, led to budget expansions of North American
Treaty Organisation (NATO) members, many of which embarked on phased defence
budget expansion plans to reach the spending mandate of 2% of their Gross
Domestic Product (GDP).
Post-COVID-19 China is on an economic rebound and has displayed increasing

military aggression against India and other countries, revitalizing defence spending
in the affected markets. China also continues to improve military capabilities which
39
Countries included in the estimate are Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman,
Saudi Arabia and Turkey. Data for other countries is not available.
matched with its increasing aggression is a source of global nervousness. At the
same time, Russia is already ahead of Western nations in terms of military
technology such as hypersonic weapon systems and electronic warfare, and if these
nations push back defence programmes the technology gap between the two
opposing groups will only increase. Because of these reasons, the US, most of
Europe, India, Japan, UK, France, Australia etc., cannot deprioritise defence
spending and Research & Development (R&D). Some nations such as Brazil, Saudi
Arabia, Indonesia, have reduced their defence spending, but the top 15 spenders
which account for ~ 80 % of defence spending are largely expected to maintain/
increase defence spending.
An additional factor to consider is that many operators sustain varying degrees of

forward military posture and high operating tempo that cannot be wound down
because strategic advantage will be lost. For example, India cannot reduce
operations in its forward bases in the Ladakh or the Aksai Chin regions and NATO
cannot cut down its forward operating presence in Eastern and South Eastern
Europe.
Frost & Sullivan estimates that the defence expenditure will continue to rise in the
medium term at a rate of 1.5% amounting to $ 2130B in 2026, largely influenced by
the top 15 spenders even though some areas/ countries from the rest of the world
may see a reduction in defence spending.
Figure 15 - Global Defence Spending Forecast: 2021-2026
Note: Forecast for period 2021- 2026 is based on Frost & Sullivan model in constant
USD 2019 prices
The projected rise is based on an assessment of global GDP projections, and on
assumption of continued political tension for next two years followed by a gradual
easing of relationships. Any flare up in geo-political uncertainty due rise in tensions
between US – China, India- China, India – Pakistan, Russia- NATO Israel-Palestine,
and re-emergence of Taliban at global theatre following the current situation in
Afghanistan would likely result in significant upsides to the forecast.
Indian Defence Budget Brief and Forecast

There is a structural shift in the defence budget with increased allocation for
modernisation funds, and approval of non-relapsable fund. The fund available to the
defence industry participants during FY 2022-203140is estimated at $ 339 billion.
The Indian defence budget has been growing at the rate of 7% in the past 5 years as
below41:
Figure 16 - Defence Budget Growth FY 2017-2022
The defence budget has 4 main components: MoD (Civil), Defence Services
Revenue, Capital Outlay on Defence Services, and Defence Pensions, and not all of
it is available to the defence industry participants. Examination of the allocation for
different code heads for defence budget of FY 2022 ($ 64.62 B), and their
description is as below:
40
The defence budget discussion is based on India financial year
41
The defence budget data is sourced from https://www.indiabudget.gov.in. The defence budget is
announced in INR Crore (1 crore =10 Million). For the purpose of this report, all current and past budget
figures have been converted to USD at an exchange rate of 1 USD =74 INR, so as to have an equal basis of
comparison. The figures may not match with SIPRI figures due different standards of classifying defence
expenditure, and variation in current USD conversion rate.
Figure 17 - FY 2022 Defence Budget Breakdown
Code Head Description Analysis
Revenue Defence Services Revenue  The revenue component

Expenditure comprises revenue expenditure amounted to $28.65 billion / 44%
of all the 3 services, in addition to of the total allocation in FY 22.
expenditure of Ordnance  Most of this budget is not
factories, and Research and directly available for defence
Development (R&D). The major industry participants with the
heads are pay and allowances of exception of stores, repairs, and
serving personnel, transportation, special projects.
works, stores, special projects,  The total amount available
repairs and refits, and to defence industry participants is
miscellaneous expenditure. $ 6 B in the current year
Capital The Capital Outlay on Defence  The allocated capital

Expenditure Services encompasses all the expenditure amounted to $18.25
acquisitions expenditure of the billion / 28 %. in the defence
three services in addition to the budge FY 22
capital acquisition of ordnance
factories, R&D, DGAQA (Director
General Quality Audit) and
prototype development under the
Make procedures.
MoD (Civil) MoD (Civil) deals with the The allocation is not available to the
expenditure of the civilian defence industry, and amounted to $2.06
Code Head Description Analysis
personnel in defence services. B / 3% in FY 22 budget
Defence Defence Pensions is allotted for  This allocation is not

Pensions pension and allowances of retired relevant to the market, amounting
personnel to $15.66 billion / 25% in FY 22
budget
 Various measures are
being deliberated to reduce the
defence pension outgo which
includes increasing the retirement
age of the officers and Personnel
Below Officers Rank. The move is
likely to affect 50,000 personnel
and reduce the pension outgo in
the medium term 42
Table 2 - Defence Budget Components Description
An examination of the defence budget components in the above table shows that the
amount available to the defence industry participants for FY 22 Budget is $ 24.25
billion.
Frost and Sullivan would like to highlight that the allocation directly benefiting the
industry is more relevant for the purpose of this report as compared to the total
defence budget which includes salaries, pensions and miscellaneous expenditure.
Analysis of past trends shows that the total allocation which directly benefits the
industry has grown at rate of 7%. The growth rate in the period FY 2017-2019 was
significantly below the average growth rate as a ballooning salary and pension bill
consumed a larger portion of the total allocation. In contrast, the growth rate in FY
2020, 2021 has been 10.5% and 4.9% respectively, while the increase in FY 2022
is a staggering 14.9%. Additionally, FY 2021 was characterized by an overspend of
18.6 % above the budgeted capital allocation on back of the emergency purchases
following the face off with China
42
https://theprint.in/defence/why-modi-govt-will-be-spending-less-on-defence-pensions-next-year/596768/
Figure 18 - Capital and Stores Expenditure Growth: FY 2016-FY 2022
The acceleration in the capital and stores procurement represents a structural shift in
the budget which earlier catered mostly to salaries and pensions without providing
sufficient funds for modernization. No doubt, it comes on back of increase in geo-
political tension which has made the Indian Govt. take stock of the delays in the
much needed modernization program. The increases was also facilitated by decline
in pension out go from $17.9 B in FY 21 to the current year allocation of $ 15.66 B; a
decrease of $ 2.24 B. Going forward, it is expected that the pension share in the total
defence budget will largely remain stable with implementation of intended measures
as recorded in Table 2 .
Frost and Sullivan modeled the factors which are likely to influence the growth
trajectory of Capital and Stores allocation with weighted consideration of:
 Historical Trend: The historical trend of capital and stores allocation
shows a compounded growth of 7%, with the current year allocation exhibiting
an increase of 14.9%. It is pertinent to note here that the growth rate of FY21
budget allocation both in capital and stores procurement was influenced by
the emergency purchases, some of which will be paid in the current fiscal year
on delivery. The growth rate is expected to moderate in successive budgets.
Geo-Political Situation: It has been assumed that the current increase in geo-
political tension with China, and Pakistan will continue for next two years after
which there will be gradual return to previous state of affairs.
 GDP Growth – GDP growth has been assumed at 10.5 % for FY 21,
7% for FY 22, and 6% for the rest of the forecast period. In this respect, due
cognizance has also been taken of the measures to relax fiscal deficit targets
which would allow greater expenditure by the government43. Modernisation
Program and Delays – The modernization program has been largely affected
in the past years by bureaucratic delays and differences of opinion between
43
https://prsindia.org/budgets/parliament/union-budget-2021-22-analysis
different stakeholders such as the MoD, the armed forces and the defence
public sector units. It is assumed that the delays will reduce over the forecast
period due greater realization of the poor state of military equipment
especially after the Chinese aggression. Frost expects a greater cohesion,
effective policy implementation, and larger participation of the private industry
on account of the government push to create a level playing field, to
accelerate the modernization program
 Creation of Non-Lapsable Defence Modernisation Fund –The capital
acquisition budget has been much lower in the past when compared to the
projected requirements of the defence forces. For e.g. the gap in FY 22
capital budget projection by defence forces and actual allocation was $ 7.8
billion44. To bridge this gap, the 15th finance commission recommended
setting up of a non-lapsable modernization fund45. The total size of this fund
for the period 2021-2026 is indicated as $ 32 billion with maximum accretion
of $ 7 billion per year. The finance commission report states that, “The
incremental funding will come from transfers from the Consolidated Fund of
India, disinvestment proceeds of defence PSUs, proceeds from the
monetisation of surplus defence land, including the realisation of arrears of
payment for defence land used by state governments and proceeds from
defence land likely to be transferred to states and for public projects in future”.
 Technology Incorporation – Technology incorporation in the forecast
period will allow the forces to become a leaner and more efficient force with
consequent benefits to the salary outgo.
Based on the above factors, the capital and stores allocation is expected to grow to $
33.19 billion and $ 9.57 billion respectively by FY 2031 The cumulative amount
available during the forecast period would be $ 339 billion.
44
https://www.financialexpress.com/budget/budget-2021-22-meeting-defences-requirement-a-big-
challenge/2157394/
45
https://www.moneycontrol.com/news/business/budget/government-okays-15th-finance-commissions-
proposal-for-non-lapsable-defence-fund-6505991.html
Figure 19 - Capital and Stores Allocation Growth Forecast
Salient features of the forecast are as below:
 Although the Indian Army is the largest service, the IAF and IN will
share 70.0% of the total capital acquisition budget, with the Indian Army‟s
share at 30.0%. This is due to lower equipment cost and the slower pace of
modernisation in the Indian army.
 Aircraft and aero engines make up 32% of the total cumulative
opportunity, with big-ticket acquisitions on the cards. India is set to induct
about 200 fighters in addition to ISR, AEW, rotary, and unmanned assets.
 The naval fleet, which includes the induction of IAC 2 and submarines
under Project 75 I (the Indian Navy‟s acquisition of new diesel electric
submarines, with Air Independent Propulsion), would form the next major
component at 13%.
 Weapons and defence electronics will see a major uptick in acquisition,
as the Indian forces look to upgrade their operational engagement and
network-centric capabilities
INDIA DEFENCE MODERNISATION PROGRAMMES
Delays in modernisation caused a major reduction in offensive capabilities of the

Indian forces. Considering the escalating geopolitical scenario in the Indian
subcontinent, process improvement and industry push mechanisms to accelerate
defence procurements is expected. Most modernisation programs are either totally
indigenous or are planned to have a large indigenous component which will drive the
indigenous growth. DRDO (Defence Research and Development Organisation) is the
research and development agency which develops the indigenous programs
Companies like Data Patterns which supplies to DRDO for the developmental
programs gain a competitive advantages it becomes the preferred (and often sole
source) supplier as the program shifts to production stage
The Indian Armed Forces currently operates in a state of reduced commissioned

capacity. For example, the IAF currently has 30 fighter squadrons against a
sanctioned strength of 42 squadrons. Additionally, it has a very limited number of
Airborne Early Warning (AEW) aircraft and tankers that are woefully inadequate to
meet its operational demands. The Navy operates a sole air craft carrier and has
been pushing for an additional two. IAC 1 has commenced its sea trials after a delay
and is likely to be inducted in early 2022. India needs three carriers Navy to counter
Chines Navy‟s aggressive naval modernisation, and the construction of IAC 2 is
slated for later half of the decade. The Indian Navy has issued an RFI for 56 carrier-
based fighters, and the process is still on-going. Indian Army troops suffer from
shortages even in some basic equipment. For example, a recent Comptroller Auditor
General (CAG) report indicated that there was a shortage of snow goggles, boots,
jackets, and sleeping bags for the troops stationed in high-altitude areas. The Army‟s
platform modernization effort has been lagging behind the other two services and
many projects are expected to be realized over the next 3-7 years. India will have to
procure replacements for its ageing Boyevaya Mashina Pjehoty (BMP) fleet in order
to maintain suitable capabilities for its mechanized infantry.
Delays in modernisation programs have led to back log and reduced offensive force
which is now becoming untenable in view of the large deficit and increased political
tension with China and Pakistan. Frost estimates that the modernisation programs
will be accelerated in the future due policy reforms and larger participation of private
sector participation. The modernisation programs of IAF, IN and IA as listed below
are expected to enhance the revenue opportunities for the indigenous industry
especially the private sector.
IAF Effect on Private Industry

Description
Programs
 The HAL Advanced Medium AMCA is planned to be a

Combat Aircraft (AMCA) is a program joint venture with private
to develop a fifth-generation fighter sector. The inclusion of
aircraft. DRDO will be the design private industry at an early
Advanced agency, and a private industry stage is a shift from the
Medium participant is also expected to be earlier model where
Combat roped in at the early stages of the product design and
Aircraft program. Inclusion of a private manufacturing was entirely
(AMCA) industry participant marks a fairly handled by DPSUs. The
significant shift compared to earlier shift is expected to benefit
programs. A total of 4 prototypes are the entire supply chain
planned, staring with the first flight in constituents who become a
2024-2025. part of the program.
Description
Programs
 This is the only 5th generation Further, participation in

aircraft program in which India is futuristic programs such as
involved since the withdrawal from the AMCA will increase the
Indo-Russian Fifth Generation Fighter domestic industry
Aircraft (FGFA) program. capability.
 The Cabinet Committee on Private industry players
Security (CCS) cleared the purchase which are a part of Tejas
of 83 LCA MK I A (LCA-Tejas) in a supply chain will also have
deal worth ₹48,000 crore a higher probability of being
(approximately $7 billion) from the a part of future upgrades.
state-run Hindustan Aeronautics For e.g. companies like
Tejas Mk I Limited (HAL). This is the biggest- Apollo Microsystems and
A Light ever contract awarded to HAL or any Data Patterns are likely to
Combat other DPSU till date. benefit from the program.
Aircraft  The order consists of 73 fighters Data Patterns is in the
(LCA) and 10 trainers in the next 5 years. process of getting its next
The MK 1 A includes upgrades to the gen Radar Warning
Fire Control Radar, EW system, and Receiver (RWR) approved
overall has 40 modifications over and which could then become a
above LCA MK I. This is in addition to part of the LCA , and other
initial order of 40 LCA Tejas MK I that upgrade programs such as
am under delivery. SU-30 MKI
 India has also issued an RFI for  The opportunity impact
procuring 110 fighter aircraft, a on Indian private industry
program which is often dubbed as will be significant as the
MMRCA 2. Six global aviation majors program is slated for Make
Medium having responded to the RFI for the in India. Indigenous
Multi-Role program. companies like Data
Combat  The six firms involved in bidding Patterns, TATA, and L&T
Aircraft for the contract are Boeing (F 18 and are likely to have
Global RFI F 15), Dassault (Rafale), Lockheed significant revenue
Martin (F 21), Saab (Gripen), opportunities in the
Eurofighter (Typhoon), and Russia program
United Aircraft (MiG-35).
 After the current acquisition of 83  Increased revenue

MK 1 a, there are further plans of opportunities for the private
LCA
inducting around 80 LCA Mark II. industry as future variants
Variant
 The specifications of LCA Mark II will have higher indigenous
have not yet been declared. content, and companies
Description
Programs
including Data Patterns as

mentioned earlier will have
a first mover advantage
 Initial impact for private
industry will be low;
however increased
 After the face off with China, India opportunities in future as
declared an emergency purchase of aircraft fall due for
21 MiG -29 and 12 SU-30 MKI from Maintenance Repair and
MiG -29
Russia. The MiG -29 are the existing Overhaul (MRO) since it is
and SU-30
airframes with Russia and the same carried out in India. Future
MKI
will be upgraded to meet the same upgrade programs of SU-
specifications of the current MiG 29 30MKI will likely involve
inventory. The SU-30 MKI order is to players from defence
augments the loss of aircraft which electronics such as Paras
India has suffered in the past due Defence and Space Ltd
accidents and incidents. and Data Patterns.
 The latest RFI for 6 tanker aircraft Neutral as the deal is likely
was issued in 2018, with Airbus (A to be sourced completely
330 MRTT), Boeing (KC-46), and from foreign OEMs
Ilyushin (IL-78) responding to it.
Refueller  Not much progress has been
Aircraft made after issuance of the RFI. A lack
of funds has been cited as the reason
by different sources. The program
cost for 6 aircraft is likely to be $2
billion.
 The IAF currently operates IL 76 
equipped with Phalcon radar and  The expansion of AEW
DRDO Netra aircraft, which uses ERJ aircraft program will benefit
145 as the base platform. The total a host of supply chain
inventory of around 6 aircraft is constituents such as Data
woefully short of IAF‟s requirement. Patterns which is a supplier
AEW&C
 In December 2020, the DRDO was of RWR for AEWC on a
Aircraft
cleared to modify 6 A320 from the single vendor basis.
national Indian carrier fleet for AEW
role. The planned AEW equipment will
be an advancement of the existing
Netra radar. The program cost is
expected to be $1.5 billion.
Description
Programs
 The IAF is also looking to induct  Indian private industry

106 HTT 40 aircraft (to be will benefit from in house
manufactured by HAL), which is a manufacture especially the
turbo prop aircraft and is set to companies dealing in
supplement the existing Pilatus PC 7 avionics such as Data
Mk II. Patterns and L&T.
Trainer  The aircraft has not yet achieved
Aircraft certification, although it is expected to
be certified soon. The total acquisition
cost is likely to be $1.1 billion.
 Fresh acquisition of lead in fighters
(current inventory–Hawk) is expected
at the end of the decade.
 The C 295 program, a joint Tata  Besides Tata which is

and Airbus effort, is envisaged to the JV partner, supply
manufacture 56 aircraft in India at a chain constituents like
cost of $2 billion. Dynamatic Technologies
 Additionally, the AN-32 (manufacturing) and Data
Transport modernisation program will also be a Patterns (electronics) are
Aircraft part of the IAF‟s plans during the likely to benefit from the
period. program. in India
 The later part of the decade is
likely to see an initiation of a new
program to acquire medium aircraft
for phased replacement of An-32.
Table 3 - Indian Air Force Programmes
IN Programs Description Effect on Private Industry
Aircraft Carrier  The refitted and modernised

Program former Russian ICBM Admiral INS Vikrant is the first
Gorshkov, commissioned as INS carrier which has been
Vikramaditya, is the sole aircraft built indigenously, and
carrier engaged in flying has benefited the entire
operations with MiG 29K fixed supply chain. The likely
wing fighter. The modernisation commissioning of IAC 2
has added a new dimension to will have an even higher
the capabilities of the Indian indigenous component,
Navy. including defence

 The construction of a 37,500 electronics which will
tonne Indigenous Aircraft Carrier benefit the public sector
(IAC-1) is underway and set to shipbuilding units and
be commissioned as INS private industry like
Vikrant. INS Vikrant will have a L&T.
combination of 30 aircraft, which
includes MiG-29K fighters and
AEW helicopters (e.g., Kamov
Ka-31).
Projects 17 & 17A  Mazgaon Dock Shipbuilders The Indian navy
Limited (MDL) has programs have
commissioned 4 ships of Project achieved a significant
17 stealth frigates that are level of indigenisation
capable of carrying 2 advanced and manufacturing by
multi-role helicopters. DPSUs. This bodes well
 The 7 stealth frigates with for the entire defence
advanced features and industry associated with
technology upgrades are a part the naval programs
of the Project 17A programme.
Projects 15A & 15B  Project 15A involves the
construction of additional Delhi-
class guided missile destroyers
that have stealth and advanced
features.
 Project 15 B involves similar
calls of ships and will be
constructed by MDL.
Project 1135.6-Talwar  INS Tej, Tarkash, and
Class Trikand were commissioned as
Talwar Class stealth frigates
with the replacement of Klub
missiles with the BrahMos
system.
Project 28 ASW  GRSE, Kolkata has
Corvettes indigenously designed and built
4 stealth Anti-Submarine
Warfare (ASW) corvettes with
minimised radar profiles for
stealth capability.
Carrier Borne Multi  The 4th generation MiG-29k Neutral impact as the
Role Fighters is now the flagship fighter of the deal is slated for direct
air wing of INS Vikramaditya. buying from foreign
Initially, MiG-29K and the naval OEMS
version of the Tejas were
considered for the air wing of the
under-construction IAC-1,
Vikrant. However, the Indian
Navy has begun the search for a
Multi-Role Carrier Borne Fighter
(MRCBF) for IAC-1.
 Global manufacturers have
responded to the RFI put out by
the Indian Navy, answering
questions on technical
parameters, level of
indigenisation and ToT
agreements. Dassault, SAAB,
MiG, Boeing, and Lockheed
Martin were some of the
manufacturers that have been
served with the RFI to equip
IAC-1, Vikrant, and IAC-2.
 The aircraft under
consideration are Rafale M, F/A-
18 Super Hornet, and MiG-29K
are twin jet engines, and Gripen
is a single engine option.
Maritime Patrol and  Boeing‟s Poseidon P-8I, Neutral impact as the
Recon Long Range Maritime additional acquisitions
Reconnaissance and Anti- are likely to be sourced
Submarine Warfare Aircraft from foreign OEMs
(LRMR & ASW) has been
inducted.
 With an inventory of 12 P-8I
aircraft, the Indian Navy is
considering the possibility of
acquiring 12 additional aircraft.
 The gap between
surveillance and reconnaissance
has been separated into Medium
Range Maritime
Reconnaissance (MRMR) and

Short Range Maritime
Reconnaissance (SRMR).
Naval Utility  The Indian Navy is looking at This program is slated
Helicopters replacing its Chetak helicopters under the Strategic
for operation from decks and Partnership model in
shore-based support for smaller which a foreign OEM
ships. will transfer technology
 Under the Strategic for manufacturing in
Partnership Model, the India. The successful
procurement of 111 NUH, in a fruition will lead to a
contract worth $3.2billion, was significant increase in
signed by the Defence capability of the
Acquisitions Council. indigenous industry; not
 An RFP is expected to be only the major
issued shortly to OEMs for 16 participants but also the
helicopters in flyaway condition, entire supply chain.
with the remaining 95 to be
manufactured by an Indian
manufacturer in a strategic
partnership with the OEM. The
helicopters considered are:
Eurocopter AS565 Panther,
Sikorsky S-76B, and a naval
version of AgustaWestland
AW109 Koala.
Mines Counter  Under the Strategic  Indian Navy requires
Measures Vessels Partnership model, Goa at least 24 such vessels
(MCMVs) Shipyard Ltd (GSL) is for its operational
constructing 8 MCMVs. This requirement.
could be followed by the
construction of similar additional
vessels.
Shallow Water ASW  Induction of 16 shallow water The Indian defence
Crafts ASW crafts has been processed, shipbuilding is
and the ships will be built undergoing a
indigenously. transformation with a
Amphibious Capability  The Indian Navy, to augment remarkable increase in
its amphibious capability, has capability and program
inducted the Landing Platform fulfilment.
Dock (LPD), with 5 landing ship Indigenous shipbuilding
tanks and a sealift capability of would also increase

more than 3,500 troops. opportunities in C4ISR
 Multi-role landing platform systems, heavy
docks are being considered with engineering, and EW
private shipyards, such as L&T which will benefit
and Reliance Naval and companies like Data
Engineering Ltd., in the running Patterns, Astra
for the contract. Microwave, L&T, and
Fleet Support Ships  The Indian Navy has Paras Defence and
exercised the option for one Space Ltd
follow-on ship offered in the
2008 order for fleet tankers from
the Italian shipbuilder
Fincantieri.
 The government has also
approved the induction of 5 fleet
support ships.
Table 4 - Indian Navy Programmes
Effect on Private
IA Programs Description
Industry
Infantry Modernisation  The Army began the process The army has
of acquiring 700,000 rifles, 44,000 suffered from
LMGs, and 44,600 Carbines in critical shortages,
2017. and the same is
 An assault rifle built by being made good
Ishapore was rejected, as it failed with a mix of foreign
during user trials. A contract was and domestic
signed by the MoD with Sig Sauer suppliers.
for the purchase of 72,400 SIG The corporatisation
716 assault rifles, of which the of Ordnance
Army would receive 66,400 units, Factory Board will
the Navy 2,000, and the IAF have a positive
4,000. effect on its
 The AK 203 rifle made by capability of
Kalashnikov (Russia) and the meeting the
OFB (India), a JV, is the main rifle requirements with
of the Indian Army. They are trickledown effect
made at a factory in Amethi. on the supply chain
Carbines and the LMGs will also constituents
probably build in the same factory.
Effect on Private
Industry
 The OFB has produced a

lightweight bullet proof jacket that
will be provided to the Indian
Army, which has a requirement of
186,000 units.
 India and Israel signed a deal
for Spike missiles in 2019. The
purchase included 12 launchers
and 210 missiles that were
successful during test fires.
Network-centric Warfare  Phase 1 of Shakti Artillery,
Combat, Command and Control  The C3I and Air
Systems (ACCCS) is completed, Defence systems
with 40% of artillery units will require a
equipped with advanced multitude of
networks. surveillance and
 Tactical Command Control tracking radars
Communication and Information which will benefit
(Tac C3I) systems and Battlefield players like Data
Surveillance System (BSS) are in Patterns, L&T and ,
the final test phase. EWS, Tata
Electronic Signals Intelligence
(ELINT), and Air Defence Control
and Reporting System (ADC&RS)
are in the process of
development. Bharat Electronics
Limited (BEL) and the Defense
and Research Lab at the Center
for AI and Robotics (CAIR) are
developing these systems, and it
will take 3-to-4 years to for
induction of these systems.
 The Indian Army also
continues to acquire other
required elements such as UAVs,
weapon locating radars, thermal
image intensifiers, night vision
systems, and Long Range
Reconnaissance and Observation
System (LORROS).
Effect on Private
Industry
Armour, Artillery and Air  The Armoured Corps and  A wide range of
Defence Mechanised Infantry deployed in equipment
the mountains need acquisition
reinforcement. Roads have been programs spanning
upgraded so that the T-72 tank combat vehicles,
and the BMP-2 can be deployed tanks, artillery guns,
in Ladakh. There is a need to and missiles are
procure a light tank for being pursued to
mechanised forces. A prototype upgrade the IA
based on the BAE System operational
Combat Vehicle 90 is being capability.
evaluated by the DRDO.  The programs
 India has a total of 2,011 T-90 would include
tanks armouring 40 regiments; 6 significant
regiments are being raised for components of
high-altitude conditions. electronics,
 T-72 tanks are being upgraded COMINT and
with night vision devices. The SIGINT.
indigenous Arjun tank, heavier  Significant
than the T-90, has a 120 mm gun benefits are
that can fire APFSDS, HEAT, envisaged for
High Explosive and HESH and the companies like
LAHAT missile, which is a semi Data Patterns and
active laser homing missile with Astra Microwave
an 8 km range. which have
 Arjun Mk II is undergoing trials products in the
with about 75 modifications. required categories
 With 700 BMP-1s in active
service, an upgrade is planned for
1,600 BMP-2s with a more
powerful 350 HP engine.
 In 2019, the 155 mm Dhanush,
Howitzer M-777, and the 155 mm
self-propelled Vajra were
inducted. The long-range Pinaka
missile could be inducted in 2022
with user trials underway.
 Trials for Precision Guided
Munitions are being undertaken
for artillery upgrades. The
Effect on Private
Industry
Hypersonic BrahMos missile is

expected to be inducted by 2022.
 The Army Air Defence is
awaiting the induction of VShorad
Igla S-24 missiles.
 Development trials for the
Quick Reaction Surface-to-Air
Missile (QRSAM) have been
successful and will be offered for
user trials in late 2021.
Table 5 - Indian Army Programmes
INDIGENOUS INDUSTRY GROWTH DRIVERS
Indian Defence Industry Antecedents

The Indian Defence industry is at an inflexion point, with the increased private sector
participation being the way forward.
India‟s defence industry has come a long way since it embarked on a mission of self-
sufficiency in the 1950s. The initial model was designed with enhancing the
production of low technology weapons in mind, with production and manufacture
being led by Defence Public Sector Units (DPSUs). During the early years, as
defence spending and R&D capability was low, major military programmes were
executed with help from foreign OEMs. The wars with China and Pakistan in the
1960s catalysed a change in defence policy and increased expenditure in defence
procurement. India continued to rely on foreign support; however, the onus shifted
towards licensed production – especially of more technologically advanced
platforms. In the 1980s and 1990s, the Indian government wanted to bolster self-
reliance and embarked on programmes led by the Defence Research Development
Organisation (DRDO) such as the Light Combat Aircraft program and the Integrated
Guided Missile Development program. A joint venture, which became BrahMos, was
also set up between India and Russia to develop and produce advanced cruise
missiles. This model of “joint venture led development” was pursued in other
ventures such as the Long Range Surface to Air Missile (LRSAM) program,
initialised between DRDO and Israel Aerospace Industries (IAI).
Stage 1
1. Low technology dispersion
2. Low R&D budgets
3. Some assembly under license
Stage 2
1. Increased budgets post wars in the 1960s
2. Licensed production – Mig 21, T-72 etc.
3. Relationship driven technological progress (limited)
Stage 3
1. DRDO and DPSU led indigenous platform development
2. Joint venture led development – BrahMos, FGFA, LRSAM
Stage 4
1. Private sector opened up for defence production
2. Offset mandates, FDI and increased emphasis on technology transfer
3. Changes in Defence Procurement Policy but limited impact
Stage 5
1. Private sector led defence production
2. Policy changes more conducive to catalyse private participation
3. Constant iterative changes
Figure 20 - The Stages of Evolution of the Indian Defence Industry – 1950 to Current
Early 2000 onwards the Indian establishment started shifting its approach to defence
modernisation. Projects led by DPSUs faced delays and setbacks and did not
achieve the level of indigenisation of components expected by the government.
Initially, Foreign Direct Investment (FDI) was viewed as the panacea for a lack of
technology dispersion into the Indian defence industry. In 2001, the defence sector
was opened up for private investment and offsets were expanded, with freedom
given to foreign companies to enter into partnerships of their choice. New
procurement categories such as “Buy and Make – Indian” were also introduced to
facilitate technology partnerships between foreign and Indian companies. However,
no major contracts were executed during this phase because of policy paralysis and
the financial terms of engagement were not conducive. The Make in India initiative
launched to increase the contribution of the manufacturing sector to the Gross
Domestic Product (GDP) by 25% places the onus of development on the private
sector. The government has been iteratively improving policy support since then to
enable the private defence sector to grow and seize more opportunities. The Indian
Defence Minister states that contracts awarded to the Indian industry by the Union
Defence Ministry increased from 39.06% in 2015-16 to 75.03% in 2019-20. Similarly,
during the same time frame 158 capital procurement contracts were signed with
Indian vendors while only 100 contracts were signed with foreign vendors46.
At the same time, the private sector has risen to the occasion and providing
successful solutions to the Indian military. L&T and Mahindra have evolved into
defence primes developing naval47 and land platforms 48 for the Indian Navy and
Army respectively, among other equipment and subsystems. These policy changes
also accelerated the development of Indian defence sub primes and component
manufacturers.
Meanwhile, several Indian defence subsystem/ component manufacturers had

already progressed from supplying components to DPSUs to providing bespoke
electronics solutions in the late 1990s itself. These companies expanded their
capabilities in the 2000s to provide more advanced solutions including electronic
warfare subsystems, microwave transmission equipment etc. In the last five years,
several of these companies have started developing full scale solutions such as
radars, command and control solutions, intelligence solutions etc. Many of these
firms have also expanded their R&D and manufacturing capabilities over the past
three years and are currently well positioned to become “partners”, not just
“suppliers”, in major defence projects executed by the government or by Indian/
international defence primes.
The evolution of private defence industry has also been aided by the shift of DPSU
stance from being present in the entire supply chain to focusing on integration and
assembly as shown in the figure below.
46
https://www.business-standard.com/article/pti-stories/share-of-indian-vendors-in-defence-contracts-grew-
over-35-pc-from-2015-16-to-2019-20-govt-120031601152_1.html
47
https://www.indiatoday.in/india-today-insight/story/lessons-from-project-75-1811982-2021-06-07
48
https://www.indiatoday.in/india/story/defence-ministry-1300-light-specialist-vehicles-mahindra-defence-
1782379-2021-03-22
Figure 21: The Indian Defence Industry Evolution – 1950 to Current
Drivers
The government’s latest policies seek to build greater self-reliance in Indian defence
R&D and manufacturing through a combination of the Aatmanirbhrar Bharat mission,
DAP 2020, Offsets and the upcoming Defence Production and Exports Policy
The Indian government‟s approach to promoting more indigenous industry inclusion

has been becoming more calibrated in the last few years. The drivers used are
indicated in Figure 21. Whilst the onus has been on increasing prioritisation for
Indian company led procurement mechanisms, several other policies have also been
initiated to simplify entry into the defence sector, and devolving more freedoms in
avenues such as export selection to Indian companies.
Figure 22- Indigenous Defence Industry Drivers

Aatmanirbhar Bharat
Aatmanirbhar Bharat envisions promoting policies and regulations that leads to self-
sustainment in key areas on industry, including defence, through a wide raft of new
measures including a Defence Production and Export Policy and import protection.
The major measures under the ambit of Aatmanirbhrar Bharat in defence are as
follows:
1. Negative Import List – In order to incentivise domestic production and
limit imports, the Defence Ministry has banned the import of 209 defence
related equipment/ components. Services can only source the listed
equipment from Indian vendors. Equipment 49 covered includes segments
such as electronic warfare, sensors, radars, Unmanned Aerial Systems etc.
2. Budget Allocations – An outlay of $ 9.48 billion50 has been earmarked

for domestic procurement in FY 2021-2022 in order to mitigate procurement
delays stemming from non-availability of capital.
3. Corporatisation of Ordnance Factory Board (OFBs) – The government

aims to corporatize OFBs51 in a bid to improve production efficiency and
transparency. There are 41 ordnance factories in India, which source
components from Tier 2 and Tier 3 suppliers.
4. Foreign Development Investment (FDI) – The FDI limit under the

automatic route has been increased form current 49% to 74%52. The increase
will encourage foreign manufacturers to invest in India with confidence as they
will have a controlling stake in a joint venture.
Defence Acquisition Policy 2020 (DAP 2020)
The DAP 202053 focuses on improving indigenous manufacturing by streamlining

procurement processes and on introducing “innovation” oriented clauses to further
prototype development in India. Other new measures include incentivising foreign
OEMs and service providers to set up their own manufacturing/ MRO facilities and a
specialised category for “leasing” of equipment which could potentially speed up
capability acquisition. A brief of the acquisition categories in the DAP 2020 is
presented in the table below.
49
https://static.pib.gov.in/WriteReadData/specificdocs/documents/2021/may/doc202153101.pdf
50
https://www.thehindu.com/news/national/70221-crore-reserved-in-defence-budget-for-domestic-
procurement-rajnath-singh/article33901213.ece
51
https://www.thehindu.com/news/national/ofb-corporatisation-gets-cabinet-approval/article34833105.ece
52
https://www.thehindubusinessline.com/news/finmin-nod-for-74-fdi-in-defence-sector-under-automatic-
route/article33288079.ece#:~:text=The%20Finance%20Ministry%20has%20now,Instruments)%20rules%20for
%20this%20purpose.
53
https://www.mod.gov.in/sites/default/files/DAP2030new_0.pdf
Category Brief Benefit to Indigenous
Industry
Buy (Indian- Procurement of products from an First priority given to
IDDM) Indian vendor that have been Indian vendors with
[Priority 1] indigenously designed developed and indigenous design.
manufactured with a minimum of 50%
Indigenous Content (IC) on cost basis
of the total contract value.
Buy (Indian) Procurement of products from an Advantage for Indian
[Priority 2] Indian vendor meeting one of the two vendors who may use a
conditions: products that have been foreign design, if they
indigenously designed, developed and meet the IC
manufactured with a minimum of 50% requirements on cost.
Indigenous Content (IC); Or products,
which may not have been designed
and developed indigenously but
having 60% IC.
Buy and Procurement of equipment in Fully Indian vendor remains
Make (Indian) Formed (FF) state in quantities as in lead; incentive for
[Priority 3] considered necessary, from an Indian foreign OEMs to have a
vendor engaged in a tie-up with a JV with Indian
foreign OEM, followed by indigenous companies while
production in a phased manner facilitating Transfer of
involving Transfer of Technology (ToT) Technology.
of critical technologies. This category
mandates a minimum of 50% IC in the
“Make”component.
Buy (Global- Outright purchase of equipment from Incentive for foreign
Manufacture foreign vendor with a minimum of 50% vendor to facilitate
in India) Indigenous Content (IC) on cost basis Indian entity for
[Priority 4] of the total contract value which can manufacturing; however
be achieved in the manufacturing of without ToT.
either the entire equipment or
spares/assemblies/sub-
assemblies/Maintenance, Repair and
Overhaul (MRO) facility for the entire
life cycle support of the equipment,
through its subsidiary in India.).
Buy (Global) Purchase of equipment from foreign or Incentive to meet at
[Priority 5] Indian vendors. An Indian Vendor least 30% IC in
participating in this category would be equipment which is not
required to meet minimum 30% IC, being manufactured in
Industry
failing which offset discharge is India
mandatory. Foreign vendors will also
need to discharge offsets in all Buy
(Global) cases more than $ 267.88
million other than Single Vendor
Cases (SVC) being progressed based
on Inter-governmental Agreements
(IGAs) including FMS.
Strategic Acquisitions under the Strategic Development of Indian
Partnership Partnership model refer to defence manufacturing
Model participation of private Indian firms eco-system.
and foreign OEM in Make in India in
defence and play the role of a System
Integrator by building an extensive
eco-system comprising development
partners, specialised vendors and
suppliers, in particular, those from the
MSME sector. Strategic Partnerships
will seek to enhance indigenous
defence manufacturing capabilities
through the private sector over and
above the existing production base.
Make and This category consists of three Make Funding can be secured
Innovation sub segments – for prototyping in case
1. Make 1 (Government Funded) of Make 1, entailing less
– the government will provide development risk for the
funding to the tune of 70% of the Indian industry
cost for prototype development, stakeholder.
capped at ₹ 250 Crore to the
developing agency Innovation schemes will
2. Make 2 (Industry funded) – In channel funding to
this category, any funding for innovative defence and
design, development and security oriented start-
innovation has to be borne by the ups and MSME.
Indian vendor.
3. Make 3 – Equipment under this
category do not have to be
designed and developed in India,
but can be manufactured in India –
this category is useful for
replenishing inventory or for
Industry
product support.
Under the Innovation category, there

are three programmes for the
procurement of innovative indigenous
solutions –
 Innovations for Defence
54
Excellence (iDEX) – Projects of
low capital investment but high
innovation will be pursued from
start-ups and MSME under this
category. The final product will be
procured through the Buy IDDM
mechanism.
 Technology Development Fund
Scheme (TDF) – Projects will be
similar to to iDEX but funding will
be routed through DRDO55. The
scheme is envisaged for
improving private-public
partnership.
 Indigenous Development by
Services through Internal
56
Organisations – Prototype
development will be done by
internal R&D agencies of various
services. This emulates the
internal R&D model pursued by
the US which has several capable
high technology R&D institutions,
such as the Army Research Lab
(ARL)57, working on bespoke
requirements of the US Army.
Table 6 - Capital Acquisition Categories in the Defence Acquisition Policy 2020
The top 3 capital acquisition categories – Buy (IDDM), Buy (Indian) and Buy and
Make (Indian) emphasize on Indian company led defence modernisation with a IC
54
https://idex.gov.in/
55
https://tdf.drdo.gov.in/
56
https://www.mod.gov.in/sites/default/files/DAP2030new_0.pdf
57
https://www.army.mil/arl
category of at least 50%. Moving forward several high value tenders are expected to
fall into these categories, giving both private Indian defence primes and subsystem
suppliers ample opportunities in increasing revenue and technology base.
Defence Offsets
Though India has extensively pursued defence offsets through an official policy in
200558, the earlier policies did not concentrate on technology and R&D capability
dispersion from foreign to Indian defence companies. The Defence Acquisition Policy
2020 aims to redress such deficiencies by shifting the focus away from
“components” to “technology investments” and “export of platforms” 59. Avenues for
expanding offsets have been expanded in the DAP 2020, giving foreign entities
direct credit in transferring critical technologies to the Indian industry. Though certain
critical technologies such as hypersonic flight related technology, electromagnetic
rail guns etc. has been reserved only for DPSUs and DRDO 60, the vast majority of
technologies used in defence equipment are now open to private players.
Another major positive change in India‟s Offsets policy is the elimination of “offset
banking” which foreign companies could use to claim credits on conducting routine
business activities in India. The government has tried to balance the interests of
foreign stake holders here by allowing them to authorize their vendors to discharge
offsets on their behalf. Note that the baseline indigenous component mandates for
Buy (IDDM) and Buy (Indian) categories have been increased by 10% to provide
more opportunities to the Indian industry. Overall, the new changes aim facilitating
technological capability advances of indigenous companies while reserving a greater
opportunity share for them in military contracts, accelerating the growth of the Indian
defence industry.
Defence Production and Export Policy 2020 (Draft)
The Defence Production and Export Policy61 is another ambitious step towards
Atmanirbhrar Bharat and aims to achieve an industry turnover of $ 25 Billion,
including exports of $ 5 Billion by 2025, doubling the size of India‟s aerospace and
defence industry in a timespan of five years. This policy aims focuses on the eight
areas listed below:
Focus Area Brief Benefit to Indigenous

Industry
Procurement  Includes reforms such as the  Greater
Reforms already initiated Negative Import procurement
Lists contracts go to
indigenous industry.
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59
https://www.orfonline.org/research/defence-acquisition-procedure-2020-imperatives-for-further-reforms/
60
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61
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Industry
 Taking a project based  Less planning
approach to defence procurement slippages and thus
and modernisation. Several less risk for the
developed nations, such as industry
Australia and Canada, that take a  Faster
project based approach towards acceptance rates,
defence acquisition, have been procurement cycle
successful in time bound rationalisation
modernisation without delays
 Overhaul of testing and
evaluation procedure and
processes to save time
 Adopt a “family of weapons”
approach and move away from
discrete procurement
Indigenous  Intergovernmental mechanisms Higher value/ long
Support to to promote indigenization duration contracts from
MSME and  A Defence Investor cell to DPSUs/ OFBs can be
Start Ups handhold start-ups and MSME anticipated to go to the
 DPSUs/ OFBs to issue long private defence industry
term contracts for critical items to
incentivize indigenous private
industry by lowering risk and
guaranteeing revenues
Optimising  Setting out a separate budget  Greater domestic
Resource for domestic procurements. procurements
Allocation Enhance domestic procurement  DPSUs and
capital allocations by at least 15% OFBs likely to
per annum for the next five years offload ancillary
 Enhance efficiency and R&D/
productivity of DPSUs and OFBs subcomponent
production to the
private sector
Investment  Focus on the development of  Additional
Promotion, an Aero Engines Complex, MRO incentives to
FDI & Ease of facilities and investment in critical facilitate expansion
Doing technologies such as main battle of Indian defence
Business tanks, rocket systems, under companies in
water systems, naval systems, Defence Corridors
communication systems, electro  Indigenous
optic systems, EW systems, etc. companies can get
Industry
 Provide additional support for into new segments
Defence Corridors rapidly
 Continued easing of licensing
for defence industries
Innovation  DRDO to set up specific  Indian private
and R&D “missions” in select areas of companies likely to
hypersonic weapons, armoured become major
vehicles, submarines, airborne partners of DPSU
sensors etc. as opposed to
 Include production partners at “suppliers”
early Technology Readiness  Involvement at
Levels (TRL) itself early project stage
 Competitively funded itself
prototyping  Funding for
 Systems Engineering approach prototypes
 iDEX for startups
DPSUs and  Position DPSUs as system  More
OFB integrators and create a multi-tier opportunities to the
domestic supply chain Indian defence
 Corporatization of industry as DPSUs
DPSUs/OFBs offload subsystem/
 Maximise outsourcing from subcomponent
indigenous sources production to
 Disinvestment and private players
technological upgradation
Quality  Streamlining of processes and  Greater
Assurance & made time-bound opportunities and
Testing  Accredited third party revenues in the
Infrastructure inspection bodies to augment resting and QA
DGQA in quality control sector for the
 Government testing and quality private defence
control infrastructure to be industry
expanded and made easily  Products can be
available to private players made market-ready
 Assistance provided to industry more rapidly
to set up testing facilities  Lesser wait times
 Expanding self-certification in for private defence
certain cases companies that
want to use
government testing
Industry
facilities
Export  India aims to add $5 Billion in  Faster export

Promotion defence exports by 2025 license approvals
 Open General Export License  Attaché support
regime for export
 Defence Attachés to promote promotion
Indian defence industry
 Export clearance processes to
be made time-bound and hassle
free
Table 7 - Features of the Draft Defence Production and Export Policy 2020
Rising Defence Exports

The Indian defence exports are likely to grow at a fast rate due easing of export
restrictions and policy changes. This is also being compounded by rising prowess of
the Indian defence suppliers. The Indian defence exports are now dominated by the
private sector as compared to defence public sector units, and are expected to drive
revenue opportunities Companies in niche products such as Data Patterns are well
positioned to capture the growth in exports
India continues to be the among the top 5 importers of armed equipment in the
period 2016-2020 as per SIPRI report; “Trends in International Arms Transfer”
released in 202162. However, it is heartening to note that its share of the global arm
imports dropped from 14% in 2011-2015 to 9% in 2016-2020, a drop of 33%. This is
a clear indicator of the fruition of efforts to promote the capability and sourcing from
domestic defence industry.
While India continues to remain a net importer, the country also figured in the top 25
exporters in the same list for the first time in 2019. India was ranked as # 23 in 2019,
and # 24 in 2020 (the drop is attributable to manufacturing disruptions due a
stringent lockdown) in the overall list of arms exporters. The share of India in global
defence exports was pegged at 0.2% for the period of CY2016-2020 as compared to
0.1 % in the period CY 2011-2015; up by 288%63.
The defence exports from FY 2014-15 to FY 2020-21 are shown below64:
62
https://www.sipri.org/sites/default/files/2021-03/fs_2103_at_2020_v2.pdf . All SIPRI data is represented in
CY
63
Percentage increase does not match due rounding off the global share in exports
64
https://www.mod.gov.in/sites/default/files/MoD2RE7621.pdf
Figure 23 Indian Defence Export Growth
Indian defence exports crossed the $ 1 billion mark in 2018-2019. There was a dip in
the exports in 2020-2021 largely attributable to supply chain and manufacturing
disruptions which have eased now.
A few years back, India‟s export customers were only small economies such as
Seychelles, Suriname, Myanmar, Sri Lanka etc. Now, exports stand more diversified
both in terms of product and their markets. Recent exports include the following-
 Helmets, bomb suppression blankets, soft armour panels and cartridges to

Germany.
 Night vision devices to Finland.
 Mine protected vehicles, over-vests, helmets, soft armour panels and civil
helicopter protection equipment to the United Arab Emirates (UAE).
 Export of radar components to Singapore.
 Weapon locating radar systems to Armenia.
 In September 2017, India secured a military export order for $ 21.07 million
for 40,000 pieces of components for artillery guns from the Government of the
United Arab Emirates.
 The Garden Reach Shipbuilders & Engineers Limited (GSRE) sold India‟s first
indigenously made warship, the Barracuda, to Mauritius for 58.5 million.
 India has sold indigenously developed lightweight torpedoes to Myanmar and

Vietnam.
 Avionics have been exported to Malaysia for the Sukhoi Su-30MKM.

 One Fast Patrol Vessel and 11 Fast Interceptor boats were exported to
Mauritius.
 Three HMS-X2 Sonars were exported to Myanmar in 2015.
Note that majority of the exports today are being driven by the private sector and the
government is creating enablers for Indian companies to further improve exports.
With further liberalisation of export license, and increasing capability, the prospect of
Indian defence exports looks bright. Globally, there is a drive to reduce the cost of
defence equipment produced, and Western defence majors are increasingly looking
at Indian companies, especially those with competencies in defence electronics and
ancillary technologies, for potential partnerships. More Indian Tier 2 and Tier 3
defence companies will have opportunities to embed themselves into global defence
supply chains moving forward.
The jump in exports can be attributed to modifications of export policy made in order
to make it easier for companies to get export licenses. The department of defence
has further issued guidelines on strategy for exports which aims to facilitate the
vision of exporting $ 5 billion by 202565. The major initiatives of the export strategy 66
are as exhibited in Table 9 below:
Initiative Brief
Establish A specific export promotion/ facilitation body with participation from

Export industry representatives. The role of the body would be to
Promotion
Body (i) Render advice to government on various export related
issues
(ii) Coordinate all export facilitation schemes of the

government
(iii) Increase awareness amongst the industry about various

export facilitation measures
(iv) Promote exports through specific marketing efforts in

targeted countries
(v) Facilitate national and international trade shows
65
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exports-by-2025-rajnath-
singh/articleshow/80705233.cms#:~:text=Aim%20to%20achieve%20%2425%20billion,India%20News%20%2D
%20Times%20of%20India
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Defence Steering committee under the Chairmanship of Secretary,
Export Department of Defence Production with representatives of Armed
Steering Forces, DRDO, PIC Wing, Acquisition Wing, MEA, and DGFT. The
Committee functions would be to
(i) Take decisions on cases of export permissions, which are

outside the purview or scope of subordinate
authorities/committees particularly export of indigenously
developed sensitive defence equipments,
(ii) Monitor the progress in defence exports and suggest

specific steps/ strategy to boost exports
Defence (i) Industry delegations from public/ private sector/ JVs of

Diplomacy private and public sector would be included in bilateral
meetings/ discussions with various countries so that the
importing country gets due comfort while importing from
India
(ii) Industry delegations would be taken to target countries

under the leadership of officials or DPSUs representatives
(iii) Indian Embassies/ Missions abroad would be associated

in making targeted efforts for promoting export of Indian
defence products.
Export (i) Line of credit facility available in Ministry of External

Financing Affairs would be leveraged suitably to promote defence
exports from India.
(ii) Possibilities for financing of defence exports through EXIM

Bank.
(iii) Buyer‟s Credit facility of Department of Commerce would

also be leveraged.
(iv) Separate strategy to finance the exports to weaker

countries would be worked out in consultation with MEA,
EXIM Bank, DPSUs, private sector and other financial
institutions.
Use of Offset (i) Offset Policy to be reviewed and aligned towards final
Policy integration of weapons/systems in India and promoting
export of such systems from India
(ii) Policy to be reoriented towards acquisition of critical

technologies required for high end weapons/platforms so
that the same can be leveraged for export
Issue of NOC Revision of policy to issue NOC and End User Clearance certificates
including provision of „in principle‟ clearance to the industry, so that
it can explore export opportunities
Online and A web based system to be developed to receive applications for

Time Bound NOC online and convey the NOC to the companies
Clearance
Export of Defence Export Steering Committee will take appropriate decisions

Indigenously regarding exportability of item with/ without modification or
Developed degradation.
Sensitive
Systems
Table 8 - Department of Defence Production Strategy for Exports
GLOBAL & DEFENCE ELECTRONICS MARKET
Global Defence Electronics Market

At present there are over 150 active conflicts ongoing in different regions primarily
over the last decade. This has meant that the complexity and diversity of the conflict
has evolved, forcing armed forces across the globe to revisit their force structure,
concept of operations and invest in evolving technologies. As operators are exploring
hybrid warfare and multi domain operations, increasing investment in defence
electronics will ramp up towards the later part of the decade.
Defence electronics will have to evolve to enable more complex and dynamic
operations that provide operators with force multiplier capabilities. Globally defence
electronics procurement is going to become a core component for defence
procurement as the amount of electronics that are fitted onto platforms continues to
grow. Over the last decade the defence electronics component has consumed a
larger share of the value of the platforms overall value as defence capabilities
evolution continues through evolution of the electronics systems and embedded
software rather than the platform itself. Aircrafts have seen a large adoption of new
optronics systems, communication systems and battle management systems that
exploit the new multi domain concept of operations. Naval platforms have been
increasingly adopting new electronic warfare, radar, command and control systems
as platforms have been required to undertake muti-role operations. The increase in
defence electronics spending is a symptom of a wider shift in battle engagement
philosophy from combat mass – where having numerical superiority was key towards
a smaller number of highly capable platforms supported by sophisticated defence
electronics systems.
The following technology areas will have significant impact on the defence
electronics market and dictate demand:
1. Machine Learning and AI

2. Software Defined Systems
3. Open Architectures
4. Convergence of RF systems
5. Edge Computing
Platform recapitalisation will drive the global defence electronics market for the
immediate future. New platform procurements such as the Next generation future air
combat systems (FCAS and Tempest) will see an increase in the number of defence
electronics content used compared to legacy platforms. Upgrades to existing aircraft
fleets, with the use of new AESA radars, electronic warfare, ISR systems. Naval and
land systems are also experiencing higher investment in defense electronics, with
renewed focus on electronic warfare, self-protection systems, etc.
Programme Time-Frame Description
F-35 2015-2044 The Lockheed Martin F-35 Lightning II is an

Program American family of single-seat, single-engine, and
all-weather stealth multirole combat aircraft to
provide electronic warfare and intelligence,
surveillance, and reconnaissance capabilities. The
U.S. plans to buy 2,456 F-35s through 2044 and is
projected to operate until 2070
Next- 2017-2035 The Next-Generation Combat Vehicle (NGCV) is

Generation intended to procure a variety of armored vehicles to
Combat replace existing platforms that are nearing the end
Vehicle of their service life. The program covers the
(NGCV) following systems:
Replacement for the M2 Bradley IFV.

Replacement for the M113.
A light tank for Infantry Brigade Combat Teams

(IBCTs).
Three unmanned ground vehicles in light, medium,
Programme Time-Frame Description
and heavy configurations.

Replacement for the M1 Abrams main battle tank.
Type 26 2020-2050 The programme, known as the Global Combat Ship,

frigate was launched by the UK Ministry of Defence to
partially replace the navy's thirteen Type 23
frigates, and for export. A total of 32 are planned to
be built for UK, Australia and Canada.
Main 2020-2027 The Main Ground Combat System (MGCS) is a

project by France and Germany since 2012 to
Ground
replace their currently deployed Leclerc and
Combat
Leopard 2 main battle tanks (MBTs). The program
Systems
is expected to contribute towards continued growth
(MGCS)
towards the end of the decade as the programs
transition to production contracts.
Pegasus 2021-2025 Germany had plans to acquire four Northrop

Program Grumman MQ-4C Triton UAVs configured for
signals intelligence (SIGINT)) at an estimated cost
of $2.5 billion. Instead, it has decided to acquire
new strategic airborne signals intelligence (SIGINT)
capability based on a fleet of modified Bombardier
Global 6000 business jets.
Table 9 - Brief Overview of Global Defence programs
As platforms have become more complex, the defence electronics component of the
platform acquisition cost is expected to rise from 30% to 45%. As such the global
defence electronics market was worth ~ $ 550 billion from 2016-2020 growing at a
CAGR of 4.1% during the period, and is expected to be worth ~$ 1.74 trillion from
2021-2030 with a CAGR of 6.2%.
Figure 24 - Global Defence Electronics Market
Note: 2016-2020 is the actual market size. 2021 -2030 figures are estimated market
size. CAGR line depicts the average growth rate during 2021-2030.
Indian Defence Electronics Market

Defence Electronics
The Indian Defence Electronics segment will witness large scale indigenization
efforts over the next decade leading to improved manufacturing and quality
standards. This will further increase the presence of Indian components in global
supply chains which are already being used in Israeli UAS and European combat
aircrafts. At present Defence Electronics make up only 25-35% of the cost of
platforms used by the Indian armed forces, which is expected to increase in the
future. However, at present over 60% of the electronic components used are
supplied by foreign OEM‟s. As indigenisation efforts continue, future procurement will
see a large portion of defence electronics sourced locally, and as such platform
recapitalization programmes across all three forces such as new combat aircraft
acquisition, submarine building and T-72 replacement will be key contributors to
future market valuation of this product segment.
The Defence Electronics market was cumulatively worth ~ $ 8.09 billion from 2016-
2020 and grew at a CAGR of 4.5% during the period67. At present the market is
67
Note: All forecasts and past estimates have been calculated for CY The years mentioned in the write uo in
this section also pertains to CY.
evaluated to be worth approximately ~ $ 1.88 billion in 2021 68 and is expected to
grow to ~ $ 6.99 billion in 2030 with a cumulative market opportunity for this segment
in the order of ~ $ 43.98 billion and a CAGR of 15.71% during the period.
Figure 25 - India Defence Electronics Market

Note: Figures for CY 2016-2020 is the actual market size. CY 2021 -2030 figures
are estimated market size. CAGR line depicts the average growth rate during CY
2021-2030.
The segment will exhibit growth until 2026, driven mainly by the programmes listed:
Program Name Defence Electronics Opportunities
UAS procurement by the IAF $ 1.43 billion
Rotary Wing Procurement by the IAF $ 1.88 billion

and Indian Navy
IFV/ APC Procurements by the Indian $ 3.61 billion

Army
Command and Control/ Tactical $ 5.09 billion

Communications Modernization
68
The Indian defence budget was discussed in FY; however these projections are for calendar year. There is no
significant difference between the two values as a time difference of a quarter is inconsequential due to the
length nature of acquisition cycle
Combat Aircraft Procurement by the $ 7.9 billion
IAF and Indian Navy
Table 10 – Programs Driving Indian Defence Electronics Market
As programmes come to a conclusion such as UAS, Naval Helicopters and transport

aircraft and upgrade programmes for Offshore Patrol Vessels, a dip in the projection
is expected in the 2027-2028 timeframe. However, an immediate rebound is
expected as modernization requirements for IAF‟s ISR and Combat aircraft and
extensive C3 and tactical communication-oriented modernization get underway.
EMP Protection
The EMP Protection market was cumulatively worth ~ $ 2.21 billion from 2016-2020
and grew at a CAGR of 5.5% during the period. The EMP Protection segment will
grow from ~ $ 513 million in 2021 to ~ $ 4.3 billion in 2030 at a CAGR of 26.6%
during the period. The total market valuation for EMP Protection equipment during
this time frame is forecasted to be $ 27.8 billion.
Figure 26 - India EMP Protection Market

Note: CY 2016-2020 is the actual market size. CY 2021 -2030 figures are estimated
market size. CAGR line depicts the average growth rate during CY 2021-2030.
As greater emphasis is placed on hardening of forward Command and Control

infrastructure bases and platforms from Chinese attacks, EMP protection will be
more closely integrated in future platform designs resulting in greater investment in
the segment.
Defence Optics
The Defence Optics market was cumulatively worth ~ $ 1.09 billion from 2016-2020
and grew at a CAGR of 4.5% during the period. The Defence Optics market will be
driven by major procurement of airborne combat and ISR capability requirements
along with land forces modernization. The Naval contribution to this segment will be
limited in comparison to the Air Forces and Land Forces. The market is expected to
be worth approximately ~ $ 255 million in 2021 and grow to ~ $ 2.1 billion in 2030
with a cumulative opportunity of ~ $11.49 billion at a CAGR of 26.5%.
Figure 27 - India Defence Optics Market

New procurement of electro optic payloads for the Navy‟s future Multi Role
Helicopters, targeting systems for next generation combat aircraft for the IAF and
night fighting capability for the older BMP-2 and new IFV‟s will drive a surge in the
defence optics market. A further acquisition spree is expected in 2028 as several
platforms in the IAF especially ISR ones ill need to have mid-life upgrades. Similar
mid-life upgrades are expected for the Navy‟s patrol vessel fleets and MBT‟s of the
Indian Army, requiring new imaging equipment.
Military Radar Market
The military radar r market was cumulatively worth ~ $ 5.02 billion from 2016-2020
and grew at a CAGR of 7% during the period. The Radar market is estimated to be
worth approximately ~ $ 1.25 billion in 2021 made up of radars for ground, naval and
radars for airfield. India has approximately 14.5 thousand kilometres of land borders
to monitor of which approximately seven thousand kilometres is critical. With a naval
fleet size of 133 platforms, they represent a significant opportunity for radar
modernization and upgrades in the future. The market is expected to grow to ~ $
3.18 billion in 2030 with a CAGR of 10.9% and a total market opportunity of ~ $
20.59 billion.
Figure 28 - Military Radar Market

New procurements for precision approach radars are expected to modernise airfield,
with radars older than 20 years expected to be gradually phased out over the next
decade. Data Patterns already having sold Precision approach radars, wind profile
radars and Doppler weather radars to the Indian government has positioned
themselves for success for future programs in the next decade having the
technological and delivery capability for success. Data Patterns won the Array Group
Receiver Unit (AGRU) as part of the Arudhra - Medium Power Radar program. Data
Patterns will supply ~ 55 units of AGRU/ Arudhra radar. RFP for 18 Ashwini - Low
Level Transportable Radar (LLTR) are expected from Air Force next year. The 18
radars are expected to cost around ~ $ 270 million, with IA has requesting budgetary
quotes from Data Patterns, Astra Microwave and BEL. The development of new-
generation missiles with high-end technologies is a major threat to strategic locations
and platforms, such as military airbases and ships. Some of these new
developments include nuclear-capable ballistic missiles and high-speed cruise
missiles. New radar procurements will be required to counter evolving threats and
thus have features such as multiple-bands, AESA radars, etc. Naval vessel
upgrades such as the Talwar-class frigates, procurement of additional Shivalik-class
frigates and replacement of the Godavari-class will drive radar procurements. Data
Patterns has delivered airborne surveillance radar (all of the hardware) for
helicopters and fixed wing aircrafts to LRDE on a single vendor basis. LRDE is
expected to flight test this radar in the next few months. This will be offered for
Navy‟s Dornier upgrade and as buyer nominated equipment for the new helicopter
programs.
Airborne EW
The Airborne EW was cumulatively worth ~ $ 1.8 billion from 2016-2020 and grew at
a CAGR of 7% during the period. The Airborne EW market is expected to be worth ~
$ 378 million in 2021 and grow to ~ $ 606 million in 2030 at a CAGR of 5.4% driven
by modernization of platforms such as the IAF‟s requirement for 200+ single engine
fighters, acquisition of the HAL Tejas, Dassault Rafale, procurement of A330‟s and
C-295 and future procurement of the HAL AMCA. Modernization of existing platforms
will also contribute towards this market evaluation. Indian companies that have
existing RWR, COMINT, ELINT and EW systems like Data Patterns are well
positioned to capture the opportunity having already built systems in partnership with
DRDO. For e.g., Data Patterns‟ next gen RWR meets the requirements for the LCA
MK IA and is under testing.
Figure 29- India Airborne EW Market

With an increased focus on EW systems, they are undergoing a modernization

phase due to the emergence of Next Generation Jammers and AESA that is being
explored for EW equipment. These technologies allow generating complex jamming
waveforms, in addition to being modular to be installed on platforms as per the
operational requirements. There is also a shift towards integrated EW solutions with
advanced signal processing and miniaturisation with complex and powerful digital
wideband receivers that are able to instantaneously process GHz of signals in
complex spectrum environments. The market will also be drive by an increasing
need for a distributed, adaptable network Electronic warfare capability to facilitate the
integration of several EW technologies on both manned and unmanned aircrafts.
This will enable a complete horizontal integration of multiple payloads, leading to
increased situational awareness.
Torpedoes
The Indian Defence Electronics market for torpedoes is primarily being driven by
replenishment of existing arsenals and procurement of new naval platforms such as:
Program Name Torpedo Opportunities
Arihant – Class submarine A total of four submarines planned in two

flights.
S5 – Class 3 planned. Expected to start production by

2022.
Project 75 Alpha The Indian Navy aims to procure new

nuclear-powered attack submarines (SSN).
The construction is expected to commence
on 2023-24 while the first submarine is
expected to enter service in 2032.
INS Vishal INS Vishal as a replacement of the INS

Vikramaditya
Varunastra - Torpedo Advanced heavyweight anti-submarine

torpedo, developed by DRDO for the Indian
Navy. In June 2019, Ministry of Defence
awarded a contract worth ₹1,187 crore
(US$170 million) to Bharat Dynamics
Limited to supply Varunastra to the Indian
Navy with plans for 73 of them.
Table 11 – Programs Driving Torpedoes Sensor Market
The Torpedo component market was cumulatively worth ~ $ 63.81 million from 2016-
2020 and grew at a CAGR of 7.5% during the period. The market for seekers for
torpedoes is expected to be worth ~ $ 16 million in 2021 and grow to ~ $ 41 million in
2030 with a CAGR of 10.89%. The stable growth is since the number of torpedoes in
service is expected to be the same, increasing only as the number of naval platforms
as described above increases. Moreover, about 5% of the torpedo stock is expected
to undergo replenishment every year.
Figure 30 - Torpedoes Component Market

Military Avionics
The Defence electronics avionics market is dictated by the frequency of

modernization and replacement of existing platforms in addition to procurement of
new combat capabilities. The market will be driven by procurement of avionics for
the following platforms:
Program Name Avionics Opportunities
HAL Tejas Mark1/Mark 1A HAL has already received orders for 40

aircraft of Mark 1 variant which will be
delivered by 2022. In 2021 the Ministry of
ordered 83 advanced Tejas with advanced
AESA Radar, Jammers, superior avionics,
next-gen BVR missiles, better payload, and
enhanced combat range. The induction will
be completed by 2028. Data Patterns has
supplied the Smart Standby Display Units
(Cockpit Displays) which will be procured
for this program.
MMRCA 2.0 An RFI was issued by India in April 2018

for the procurement of 114 multi-role
combat aircraft for the Indian Air Force.
C295 56 C-295 transport aircraft under the Make-

in-India initiative. The program is at
financial approval stage and the contract is
likely to be signed in the near future. The
first 16 planes will be supplied in two years,
with the rest spread over the next eight
years.
HAL Light Utility Helicopter On March 2021 Ministry of defense placed

an initial order of 6 light utility helicopters
for the Indian Airforce. The deliveries are
expected to commence from Aug 2022.
The Glass cockpit and Digital Interface
units are designed and developed by Data
Patterns. Based on around 180 LUH
planned, contracts of Rs 2500 to 3000
million is likely for these of these are
required for around 180 LUH planned. The
number of LUH is likely to go up due the
delay in finalising the Kamov 226 program.
Table 12 - Programs Driving Military Avionics market

The military avionics market was cumulatively worth ~ $ 1.27 billion from 2016-2020
and grew at a CAGR of 8.8% during the period. The Avionics market is expected to
be worth approximately ~ $ 315 million in 2021 and is expected to grow to
approximately ~ $ 454 million in 2030 at a CAGR of 4.2% over the decade. New
aircraft procurements as highlighted above will be a major driving force for new
avionics with modern capabilities. Companies that can develop the entire range of
avionics required for both fighter aircrafts and helicopters will find ample
opportunities as India looks to procure the HAL LUH and LCA MK 1A.
Figure 31 India Defence Avionics Market
Land COMINT/ELINT
The ground based COMINT/ELINT market will be driven by modernization of existing

mechanised infantry battalions with dual purpose units performing COMINT/ELINT
roles as well as dedicated platforms. There are dedicated platforms that are
operated that were developed as part of programme Divya Drishti. Other platforms
that are dedicated to this task are the Samyukta Electronic warfare system, the
Himashakti SIGINT platform and the Himraj ground based ELINT solution. At present
the penetration of COMINT/ELINT capability is limited but is expected to increase in
the future with the launch of program Dharashakti. Data Patterns has received single
vendor orders from DLRL for development and supply of all of the COMINT search
receivers, Direction Finder, Monitoring receivers, etc. for the Dharashakti program.
There is also a requirement for ELINT receiver as part of development program for
S&S which is a large EW requirement for Deserts and Plains nominated to BEL.
Furthermore, a new program for EW for Mountains has been initiated in DRDO as a
precursor to Army requirements. These programs would drive the ground
COMINT/ELINT market. Data Patterns is well positioned for the Himashakti and
Dharashakti program in the market having previously sold COMINT receivers to BEL
/ECIL for Samyukta upgrade, Himraj, etc. to final delivery to the Indian Army.
Figure 32- Ground COMINT/ELINT Market

The ground COMINT/ELINT market was cumulatively worth ~ $ 326 million from
2016-2020 and grew at a CAGR of 6.5% during the period. The ground
COMINT/ELINT market is expected to be worth approximately ~ 81 million in 2021
and is expected to reach ~ $ 205 million in 2030 at a CAGR of 10.89%. The total
market for the forecast period will have a cumulative opportunity of ~ $ 1.3 billion
driven by the above programs.
GLOBAL AND INDIAN SPACE INDUSTRY TRENDS
The Key Trends in the global space industry are as shown below.
Figure 33- Global Space Industry Trends, 2021-2030

The global trends are also being replicated in the Indian ecosystem as the Indian
Space Research Organisation (ISRO) is making a concerted effort to evolve the
Indian ecosystem with transfer of manufacturing technology and shift in policy
framework. The discussion of the space industry trends with respect to global and
Indian ecosystem is placed in succeeding paragraphs.
Small Satellites and Mega Constellations
Small satellite mega constellations are driving the demand for satellite and
subsystems manufacturing
Technology advances have enabled lower weight payloads to meet customer

requirements in earth observation, communication, and technology demonstration.
These roles were traditionally being fulfilled by heavier satellites in geosynchronous
and medium earth orbits; however they are now being fulfilled by small satellite
constellations in Low Earth Orbit (LEO). The technology advance has also been
aided by gradual opening of the market to commercial players which has attracted
multiple small satellite players in the industry to plan and launch small satellite
constellations. The LEO constellations are generally planned up to a height of 1000
Kms, which offers advantages of higher resolution, lower latency and higher
frequency of revisit. These characteristics of LEO satellites translates into gains for
the end customer; for e.g. provision of global connectivity at a lower latency offers
significant advantages in remote areas where the land infrastructure is either
nonexistent or too costly to set up.
About 152 satellite operators have planned satellite constellations which accounts for
about 23.75% of total documented satellite operators across all user segments.
Notable example of mega constellation is the Space X plan of around 12000 LEO
satellites for providing global connectivity. Amazon with project Kuiper has planned ~
3200 satellites, while OneWeb has planned a constellation of ~ 700 satellites. The
high number of planned satellites is driving the demand for serial production of
satellites both for lower costs, and higher manufacturing output.
In accordance with the global trend of growing satellite constellations, domestic

players such as Pixxel, Satsure, Vesta Space Technologies and Astrome are also
aspiring for small satellite constellations. For e.g., Pixxel has planned a constellation
of about 30 satellites. The efforts of the domestic players are yet to fructify, however
it is expected that the demand from these players in the future will add to the ISRO
driven demand.
Serial Production of Satellites

The rise in demand of small satellites is leading to serial production of satellites.
Domestically, the small satellite demand will add to ISRO demand. Indian private
industry will also benefit from the ISRO initiative of outsourcing manufacturing.
With multiple commercial satellite operators entering the space industry, the demand
for large number of satellites to be manufactured has risen exponentially.
Additionally, the launch time constraints demand that the operators get their
satellites manufactured in a timely fashion to align with the launch schedule. This
rise in demand for satellite manufacturing has been driving the installation of serial
production facilities across the globe. While satellite operators like OneWeb and
Starlink have vertically integrated their satellite production, many others are relying
on satellite system integrators who either operate or are in the process of installing
their respective serial production lines. These serial production facilities aspire to
assemble hundreds of small satellites on an annual basis.
The Indian space industry is largely built around ISRO which is the primary customer
and satellite operator. However, owing to new policy changes and associated ISRO
efforts, commercial startup companies have also entered the Indian space market.
Pixxel is such a NewSpace startup enabled by ISRO policies, and supported by Data
Patterns.
Apart from this, multiple commercial space industry participants have been engaged
by ISRO with an aim of ISRO evolving into the primary satellite developer and
mission controller, while commercial agencies will handle the serial production
responsibilities aided by relevant technology transfer. Consequently, moving forward
the domestic space industry in India will involve multiple commercial participants
besides ISRO.
ISRO is collaborating with private and public sector players for satellite
manufacturing and enhances their know-how through technology transfer as
depicted below:
 Collaboration with Bharat Electronics: ISRO has collaborated with BEL for
manufacturing of small satellites, microsatellites, rockets, electronic systems, and
multi-junction solar cells for space applications.
 Collaboration with Consortium led by Alpha Design Technologies: Alpha
Design Technologies is working with BEL and TASL to assemble 27 satellites for
ISRO. This is first engagement by ISRO for serial production of complete satellites
rather than just components or satellite systems.
ISRO‟s effort of engaging external agencies indicates its strategy to outsource serial
production and focus on technology development rather than production. ISRO‟s
dependency on external agencies is further expected to increase as it also plans to
involve private players during development stages for programs like Ganganyaan.
This indicates ISRO‟s shift towards research programs rather than focus on
capabilities such as in-house manufacturing and system integration.
Uberization of Ground Stations

The ground stations have not yet evolved to catch up with the exponential increase
of data transfer demand which has led to new business models such as uberization
of ground stations. The same is especially applicable to India as there are no
existing private industry providers. Early entrants will benefit from first mover
advantage.
Globally multiple small-satellite operators are aiming to deliver diverse satellite-
based imaging and connectivity services. While persistent surveillance and seamless
connectivity tend to remain domain themes in their value propositions, near-real-time
insights depend on frequent updates from the space assets. An important
component of the ecosystem would be the ground stations, and their capability to
communicate with the satellite. The ground network is yet to catch up with the
exponential increase in demand, and is still evolving to enable the LEO constellation
operations. Consequently, there is a large untapped market for suitable
enhancements to existing mission operations mechanisms.
Multiple aggregator business models are being built using digital platforms by
participants such as RBC Signals and Infostellar which are aiming to resell excess
available capacity with existing ground station terminals. These digital platforms not
only allow the ground station terminal operators to generate additional revenue, but
also provide cost-effective mission operations options to NewSpace participants. The
business model may be likened to the Uber model, where satellite data exchange is
facilitated through the relevant ground station, which then further relays it to the
client via secure automated digital process.
In India, ISRO Telemetry Tracking and Command Network (ISTRAC) plays a pivotal
role in providing ground segment for LEO and inter-planetary space missions,
regional navigation systems, and launch vehicle missions. ISTRAC has ground
stations across Hyderabad, Bengaluru, Lucknow, Port Blair, Sriharikota and
Thirvananthapuram in India in addition to 09 global ground stations. ISRO is also
planning to conduct LEO missions, and hence will require the support of an
expansive ground station network and the aggregator platforms for cost-effective
solution. India has also agreed to set up 5 more ground stations in Bhutan, Nepal,
Maldives, Bangladesh and Sri Lanka along with installation of 500 Very Small
Aperture Terminal (VSAT). Currently, the key demand for ground station services
and ground station equipment is mainly driven by ISRO. However, in the future the
demand will also be driven by private satellite operators who would establish ground
stations in the country to provide downstream services. For e.g. the ground stations
planned to be set up in North, South and Western parts of the country by Bharti
Enterprises to provide services in India through OneWeb constellation.
Domestically, there are no players addressing the ground station capacity demand
through aggregator models, and early entrants are likely to benefit from first mover
advantage.
Space System Testing

The mass production of satellites also necessitates the need for testing and
validation. The industry has shifted to model of end of assembly line testing as seen
in the automotive industry. Domestically, the testing demand will be driven by ISRO
missions, and testing equipment suppliers to ISRO will benefit from the increased
demand.
The serial production format of satellite manufacturing also has a positive
downstream effect on testing and validation. Previously, dedicated assembly lines
were developing one satellite and launch vehicle at a time, and testing and validation
of satellite and launch vehicle subsystems/components was being outsourced to
specialist testing agencies located physically away from the primary manufacturing
facilities. However, with serial production getting installed, the satellite and launch
vehicle manufacturing facilities are being forced to internalize significant portion of
the testing processes. This has led to integration of end-of-line testing with the
assembly line, similar to that of the automotive industry.
While multiple satellite and launch vehicle manufacturers, especially the Tier-1
participants have the resources to install the testing facilities in their assembly lines,
it is not resource-efficient for them to evolve the testing capabilities from scratch.
This will create opportunities for space system testing equipment participants within
the satellite and launch vehicle manufacturing market. In addition, new space
exploration programs and deep space missions will require additional testing
equipment indicating increased demand for development of custom testing
equipment in addition to existing demand.
Domestically, the demand for testing equipment will be mainly driven by ISRO. ISRO
has also made its testing facility/ equipment available to private players as per new
policy framework, to minimize their capital investment and grow the space
ecosystem in the country. Thus, majority of the domestic players are expected to opt
for testing facilities from ISRO due to lower capital investment and reduced need for
additional testing set-up. Space exploratory missions and planned programs like
Gaganyaan will also increase the demand in short-term for testing equipment. The
domestic suppliers to ISRO will stand to benefit from the increased demand.
COTS for Space
The demand for COTS components in low weight satellites has increased due
adoption of Pico, Nano and Micro satellites. Data Patterns is well positioned to
capture this demand owing to it capability of building nano satellites from scratch
including the required components
Need for faster and cheaper solutions for space has increased adoption of light
satellite solutions such as Pico (<1 Kg), Nano (1-10 Kg) and Micro satellites (10-
150Kg). These solutions are being adopted across innovative missions with unique
payloads. The project timelines for satellite development have also reduced to as low
as 09-24 months from inception to operations depending on the satellite weight and
class. Prequalified space components and commercial off the shelf components
(COTS) components are the key enablers to achieve such shorter timelines.
The miniaturization of electronics has increased adoption of COTS in the space
industry. However, the level of adoption of COTS depends on the mission type and
objective. In addition, key factors that are critical to adoption of COTS are reliability
and performance when exposed to radiation and extreme temperatures. For
example, use of COTS batteries is most common in CubeSats but as they are not
designed for space environment, they need additional testing. The advantage of
using COTS batteries is brought out by the fact that the impact of capacity loss is
minimal up to 0.1% in case of Li-ion batteries in LEO69.
Data Patterns experience of building key components such as on-board computer,
Li-ion batteries, electric power system, power distribution module, power distribution
expander, transmitters for nano satellite manufacturing positions it well to cater to
this demand. This adds to previous experience to build full solution for ISRO and
other commercial players in a customized requirement.
The demand for the light satellite solutions is increasing significantly due to multiple
planned satellite constellations and easy plug and play approach possible to
assemble CubeSats.
INDIAN SPACE INDUSTRY
Indian Space Evolution
The Indian space industry has evolved with ISRO outsourcing manufacturing to
private industry. The evolution has helped private players like Data patterns to
evolve their technical capability in addressing domestic and global demand.
Launch of the Aryabhatta satellite was the first key milestone for the Indian Space
Program as shown in the Figure 33. .Subsequently, ISRO successfully executed
69
A Review of Battery Technology in CubeSats and Small Satellite Solutions
Chandrayaan-1 & 2, and Mangalyaan missions which are indicative of ISRO‟s
technical capabilities.
Figure 34- ISRO's Key Milestones.

ISRO has been a key enabler for domestic space ecosystem by procurement of
satellite & launch vehicles systems and components through Tier I/II suppliers. It has
opened up additional opportunities for private players through its approach of
outsourcing of complete satellite manufacturing, and production of PSLVs and Geo
Synchronous Satellite launch Vehicles (GSLVs) through the Government Owned
Company Operated (GOCO) model. This shift in ISRO‟s approach has enabled
multiple suppliers to expand their role from component manufacturers to system
manufacturers, and system manufacturers to system integrators or full system
developers. The technical capability gained through these missions has in turn
positioned the domestic suppliers to cater for global demand.
Indigenous suppliers such as Data Patterns have strong anchorage in the domestic
space industry through their capability to design and develop components/systems
from scratch. Data Patterns also has capability to build to specifications in the space
electronics equipment for satellite, ground station and testing. The company has also
successfully expanded its role through development of full nano-satellite solution by
building a satellite for private player like Pixxel, indicating their capability to cater to
both sources of demand i.e., ISRO and New Space.
Indian Space Industry Expenditure and Forecast

The ISRO revenue expenditure is forecasted to increase to $ 2085.68 million in FY
2025-2026 on back of increased missions.
ISRO‟s establishment expenditure has been increasing due to the incorporation of

NSIL and IN-SPACe. About $132.09 million have been allocated as part of budget
for establishment expenditure since FY 2019 up to FY 2021. This indicates
government‟s agenda to drive further ISRO‟s efforts of engagement of private
participants in Indian space industry. The creation of these entities has led to new
opportunities for Indian private players through technology transfer and contract
manufacturing opportunities through NSIL and regulating body like IN-SPACe, which
will enable private participants to establish their own services, establish own launch
facilities and satellite operations.
In FY 2018 ISRO‟s revenue expenditure was about $1.39 Billion and about $1.86
Billion in FY 2020 i.e. growing at CAGR of 15.68%. However, a sudden spike in
expenditure is seen in FY2019 due to expenditure on INSAT operational which
amounted to 57.4% of the total expenditure. ISRO‟s Indian National Satellite (INSAT)
system had about 200 transponders boosted. The system provides services for
broadcasting, telecommunications, weather forecasting, search and rescue
operations and disaster warning.
There is a shift of focus of ISRO of being a key driver for new technology
development which is reflected from the increased space technology budget by
56.7% in FY 2022 when compared to FY 2020 revised budget and about 14%
increase when compared to FY 220 budget. Another factor contributing to rise of
budget for space technology is increased contract manufacturing and serial
production requirements of ISRO for satellites and Launch Vehicles. Space
applications expenditure will see constant growth until FY 2026, as will space
sciences and space applications, with an increasing focus on these missions.
Figure 35 - ISRO's Revenue Expenditure Forecast

Note: FY 2018-FY 2021 values are actual. FY 22 is projected budget. FY 23-FY 26
are estimates based on planned missions by ISRO.
Despite revised budget being lower for FY 2020-2021, FY 2020 has been
progressive year for Indian space industry as COVID-19 has only spiked
participation of private players within the local industry ecosystem, as recent policy
changes allow a level playing field, allowing their participation in technology
development for space exploration, Gaganyaan and deep space missions. This
indicates the shift in ISRO‟s role from being a monopolistic player in domestic
industry to being an enabler for private space ecosystem.
On-going efforts of ISRO

ISRO has planned multiple deep space and experimental missions to strengthen
India’s position in global space industry through new technology development.
Recent Indian Missions
The graphic below shows the recent Indian missions from CY 2018-H1 2021. ISRO
has successfully launched about 16 satellites and 1 exploratory mission during this
timeline. About 35.29% of the total missions were Earth Observation, while 29.41%
were communication satellites. Other salient aspects are:
 The data includes one successful launch by a private player in 2018
 5 university satellites were launched in 2021
 31 satellites are panned to be launched in 2021-2022. 54.38% of these are
earth observation and 12.9% are communication satellites.
 The total number of ISRO satellites/ missions have steadily increased from 8
in 2018 to the current plan of 31 satellites in 2021-2022 indicating an almost
400% rise. The trend bodes well for the Indian space industry
Figure 36 - Historical and Planned Indian Missions, 2018-2022

ISRO Planned Programs
ISRO Effect on Space Industry

Description
Programs Participants
Space Astrosat was the first dedicated This mission indicates the shift
Telescope astronomy mission in India utilizing X- in focus of ISRO towards
Observatory ray, optical and UV band scientific applications and
Description
Mission simultaneously, and was launched in technology development from

2015 with mission life of 5 years. The basic services. Even though the
second space science mission, the X- nature of mission is not
ray polarimetry satellite (XPoSat), is recurring, it increases the
planned to be launched by end of technology know how for the
2021. The mission is aimed at study of Indian space industry through
polarization of cosmic X-rays. technology transfer from ISRO.
By working with ISRO on such
missions the private space
players can expand their
technical capability portfolio,
which can be leveraged for
other product development and
subsequent missions.
The engagement of private
players for key system designs
for these missions will be great
opportunity for these players
along with technical capability
building. Some of the Critical
India has planned multiple deep space
systems of these missions are
missions focusing on Mars, Venus, and
communication and on-board
Moon. Shukryaan-1 is first mission by
computers for obtaining and
ISRO expected to be launched in 2025
processing data. Thus, these
to study the Venusian environment
missions are opportunity for
Deep Space using Synthetic Aperture Radar (SAR)
electronics manufacturers in
Missions to and Venus Infrared Atmospheric Gases
space such as Data Patterns,
Moon, Venus, Linker (VIRAL) (developed by CNES in
BEL, and Alpha Design etc. As
Mars and Sun collaboration with Roscosmos).
these missions require
Mangalyaan-2, second Mars Orbiter
extensive testing due to
Mission is scheduled for launch in 2024.
exposure to extreme
Chandrayaan-3, third lunar exploration
environments, the demand for
mission, is scheduled to be launched in
testing equipment is increased
2022.
during the development phase
of these missions. Data Patterns
can cater to such a demand
based on their previous
experience of working with
ISRO and similar projects.
NISAR ISRO has planned NASA-ISRO The private players such as Data
Satellite Synthetic Aperture Radar (NISAR) Patterns can work with ISRO on
Description
Mission mission in collaboration with NASA similar missions with international

scheduled to be launched in 2023. The collaborations, which will enable
mission cost is expected to be $143.11 them to develop
million. The mission objective is to components/systems to
analyse the impact of climate change international standards which
and natural hazards. they can later leverage to build
their product portfolio. In, addition
they can expand their
international customer base by
leveraging their experience on
similar projects.
The private players such as Data
Patterns, Paras Defence and
Space Technologies Ltd, Alpha
Design etc. can participate in
experimental missions, which will
enable them to enhance their
Aditya-L1 is small satellite, LEO mission existing R&D capability based on
Other
with multiple payloads to study sun and the set requirements for mission.
Experimental
surrounding atmosphere, which is Thus, improving their technical
Missions
scheduled for launch in Jan 2022. capabilities. Success of similar
missions will increase customer
confidence and prove product
reliability which is a key factor for
opting for a particular
component/sub-system or
system.
The Indian industry will benefit
from increased launch capacity
which will in turn attract
commercial satellite operators
Establishment of second spaceport by and drive revenue opportunities.
Development
ISRO Kulasekharapatnam (Thoothukudi Data Patterns, given their history
of New Launch
district), Tamil Nadu will enable multiple of building second launch pad
Facility and
Small Satellite Launch Vehicle (SSLV) count down system for SHAR,
Launch
launches, and increasing launch slot will also benefit. In addition, the
Vehicle
availability for satellite operators, development of SSLV by ISRO
will need additional testing
equipment which can be good
opportunity for testing equipment
suppliers such as Data Patterns.
Description
The development phase of the

spacecraft involves development
of life support, communication,
guidance, navigation, and control
systems. These systems will
need involvement of space
electronics manufacturers such
Gaganyaan is a part of Indian human as Data Patterns. In addition, due
spaceflight programme. First and to the nature of program
second test flights are planned extensive amount of testing is
Gaganyaan
respectively in 2022, 2023, while the required during the development
and first crewed flight to LEO is slated phases. This is an opportunity for
for 2023. testing equipment manufacturers
such as Data Patterns. Data
Patterns has already delivered
cable tester for this programme,
positioning them well for
supplying similar testing
equipment during the course of
the program.
Table 13 - ISRO Planned Programs
Figure 37 - Deep Space Missions, Historical and Planned

Indian Space Industry Ecosystem
Space Industry landscape has been expanding with entry of multiple private players
and announcements of changes in regulatory framework.
ISRO has traditionally been the key enabler for domestic space ecosystem by
contracting subsystem and component manufacturing to private players. However,
additional opportunities are now feasible with entry of new space participants such
as Skyroot Aerospace, Agnikul Cosmos, Pixxel, SatSure etc. who are planning to
provide both launch services, and services for remote sensing applications similar to
what ISRO provides. This shift in the industry landscape is driven by the Atmanribhar
initiative, and ISRO establishing level playing ground for the private players. As
brought out earlier, the establishment of IN-Space, and NSIL has also helped the
private industry. IN-SPACe is the nodal agency to access current ISRO facilities and
obtain permits/licenses for operations, while NSIL is the enabler for technology
transfer and contract manufacturing of PSLV and SSLV. Figure 37 show the key
participants in the space industry.
Figure 38 - Indian Space Industry Ecosystem

Regulatory Framework and Policies
ISRO is enabling commercial domestic players with liberalization of the regulatory
framework and policies
Effect on Indian Space
Policy Change Description
Industry
As per current SATCOM policy, Indian This shift in policy removes

SATCOM
satellite capacity utilization is prioritized over the barrier of access to
Current and
international satellites through INSAT international satellites for
Draft Policy
Coordination Committee (ICC). However, domestic players, enabling
Industry
the new draft policy permits the satellite them to have multiple
operators to offer satellite capacity allocation alternatives for pricing
directly to customer domestically and rather than pricing through
internationally for commercial and societal single entity. This will allow
applications. satellite operators to
establish downstream
connectivity services at
lower cost.
Permitting satellite
operators to launch and
operate their own satellites
will enable the domestic
players to compete in global
SATCOM and Indian entities can launch and operate their
market to provide
Remote own satellites and establish ground stations,
downstream satellite
Sensing Draft and satellite control centres in India or
services through their own
Policy globally with appropriate authorisation.
satellite constellations. This
would in turn increase
demand for domestic
satellite manufacturing
players.
Requirement for fresh
authorization as per draft
policy indicates that a
company having previous
Fresh authorization is required in case of
authorization for establishing
change of ownership for establishing space-
space-based communication
SATCOM Draft based communication system in India global.
system or ground segment
Policy This is also applicable to NGSO
will need fresh authorization
communication systems and establishing
in case of merger and
ground segment for space asset operations.
acquisition. This makes it
challenging for commercial
operators in case of change
of ownership is involved
The communication requirement related to Opportunity for the satellite
national security, strategic communications, manufacturers for defence
SATCOM Draft surveillance and critical economic applications in the domestic
Policy transactions will be developed indigenously market will be through
under direct control of the government Department of Space (DoS).
through Department of Space (DoS). Indian private industry
Industry
participants are more likely to

be part of defence
applications.
Commercial players will have
access to government
facilities on demand based
on availability. This would
reduce the need for setting
Indian industry participants can access up of ground stations in the
satellite manufacturing and ground segment country for small satellite
Remote
facilities from the government on commercial constellations. In addition,
Sensing Draft
terms, based on availability. However, any easier access to
Policy
change in ownership or replacement of the manufacturing facility
space asset will need fresh authorisation. indicates the possibility of
satellite operators extending
their role to include satellite
manufacturing to reduce cost
thus minimizing procurement
from third parties.
This indicates that
“Satellites- establishment and operation,
international players have
subject to the sectoral guidelines of
Indian FDI opportunity to invest in Indian
Department of Space/ISRO70” The
Policy Space companies post
percentage of FDI Equity Cap is 100% and
clearance from Department
the route for FDI investment is government.
of Space (DoS).
Table 14 - Regulatory Framework and Policies
GLOBAL & INDIAN SPACE ELECTRONICS MARKET
Global Satellite Manufacturing Market Opportunity

Frost & Sullivan estimates 39,033 satellites to be launched from 2021-2030. About
98.99% of the demand is from small satellites of which 49.01% of the demand is
from satellites weighing less than 75 Kg.
The growth in number of satellites has been phenomenal in 2020 71 i.e. about 1221
satellites were launched in 2020 as compared to 406 in 2019, which is a 300% rise
in total number of satellites launched. Similar spike has been observed in H1 of
2021, and about 1281 satellites have already been launched till now. This is more
70
https://dipp.gov.in/sites/default/files/FDI-PolicyCircular-2020-29October2020_1.pdf
71
Note : All data, forecasts and discussion pertains to CY for both global and Indian market opportunity
than the total number of satellites launched in 2020. The exponential rise is due to
the growth of mega constellations as discussed earlier.
Frost & Sullivan estimates that 39,033 satellites will be launched from 2021-2030 as
shown below. Small satellites (satellites weighing <500Kg) are driving this demand
as 98.99% of the demand is from small satellites, of which 49.01% of the demand is
from satellites weighing less than 75 Kg. This mass class (0-75Kg) covers all key
user segments such as university, commercial, military and civil government. The
market share by user segment for 2021-2030 is as shown in below:
Figure 39- Global Satellite Manufacturing Market share by User Segment for Mass
Class (0-75Kg), 2021-2030
The total demand consists of the new satellites as well as the replacement satellites
for continued offering of services. The peak in 2023 and 2028 in the forecast is a
consequence of overlap of new and replacement satellites. The demand in 2030 is
mainly driven by subsequent phases of satellite constellations being launched.
Figure 40 - Global Satellite Manufacturing Forecast (Units; No. of satellites), CY
2021-2030
Note: CY 2018-2020 values are historical and CY 2021-2030 are forecast based on
new installations and replacement of satellites. CAGR line depicts the average
growth rate for CY 2021-2030
Historically the revenue for satellite manufacturing was predominantly by large

satellites i.e. about 94.4% of the total revenue in 2018 and there has been a
decrease in percentage revenue to about 61.25% in 2020 and further decrease of
revenue is anticipated for larger satellites during the timeline. This is mainly due to
shift towards utilization of small satellites and associated lower manufacturing costs
per satellites.
Frost & Sullivan‟s satellite manufacturing database estimates that the global
satellite manufacturing revenues for 2021 is $29.62 Billion, and is expected to grow
to $97.94 Billion by 2030, at a CAGR of 14.21% as shown below. Within this
forecast, 80.72% are small satellites. The demand from 0-75 Kg mass class is
$1.63 Billion in 2021 and is expected to grow up to $3.82 Billion by 2030, growing at
a CAGR of 9.93%.
Figure 41 - Global Satellite Manufacturing Revenue Forecast (CY 2021-2030)
Note: CY 2018-2020 values are historical, and CY 2021-2030 values are projections
based on the number of satellites to be launched and variation of pricing by mass
class for manufacturing of satellite.
About 54.55% of the total market revenue from 2021-2030 is estimated to be from
North American Region which accounts for about 50.53% of total global demand in
terms of number of satellites. The major mass segment in the region is 150-250Kg
which has market share of 79.74% of the total market revenue. Key satellite
operators in the region are SpaceX, Telesat Canada and Lynk. Satellite
manufacturers from this region are Blue Canyon Technologies, Boeing, Harris, and
Magellan Aerospace.
Figure 42: Global Satellite Manufacturing Regional Market Share, CY 2021-2030

Asia Pacific region is estimated to have market share of 32.64% (2021-2030) in
terms of revenue driven by demand of 9555 satellites. Key Mass Class is 150-250
Kg segment followed by 75-150 Kg segment which contribute to 20.60% and
13.96% of revenue respectively. Key satellite operators driving the demand are
Galaxy Space, Axel Space, Chang Guang Satellite Technology, Synspective and
Xingyun Satellite Co. Satellite Manufacturers in the region are Alpha Design
Technologies, Inovor and Data Patterns.
The demand from commercial segment is the highest and accounts for a market
share of about 82.02%. This segment is growing at a CAGR of 12.21%. Next key
segment is military which is growing at CAGR of 48.70%. Other user segment such
as university (0.20%) and non-profit organizations (0.01%) have a lower demand.
The highest demand from 0-75Kg mass class is commercial followed by Civil
Government. The demand for 0-75 Kg mass class is expected to grow at CAGR of
10.46% for commercial user segment and 0.44% for Military.
The global demand by application is highest for communication applications
followed by EO and IoT/M2M applications. The total demand for communication is
about $21.75 Billion in 2021 and $70.69 Billion in 2030. Key user-segment for this
application is commercial and accounts to about 96.98% of communication satellite
manufacturing market share and civil government of up to 1.92%.The demand for
EO is about $4.59 Billion in 2021 and $17.76 Billion in 2030 growing at CAGR of
16.22%. This demand is mainly driven by the commercial players such as SpaceX
and OneWeb. The demand for EO missions is from combination of planned satellite
constellations and replacement mission from operational constellations.
Indian Satellite Manufacturing Market Opportunity

Historically, the number of satellites launched by ISRO has been declining from 2018
to 2020 from 9 satellites to about 2. The decline in 2020 is a consequence of revision
of ISRO‟s budgets leading to delay in missions. However, ISRO has contracted
about 27 satellites to be assembled to consortium of 3 companies: Alpha design
technologies, BEL and Tata advanced systems, indicating increase in number of
satellites to be launched by ISRO in the future. Figure 43 shows the market
opportunity for satellite manufacturing in India. In short-term the market opportunity
is mainly driven by ISRO followed by shift in 2025 where the opportunity is driven by
private players in terms of number of satellites by Indian startups such as Pixxel,
Satsure, Vesta Space Technologies and Astrome who are aspiring for small satellite
constellations, and this indicates the possibility of a growing Indian small satellite
market involving commercial players besides ISRO. Pixxel is aiming to achieve an
earth observation constellation of 30 small satellites. The total opportunity for India is
about 161 satellites from 2021-2030.
Figure 43 - Indian Satellite Manufacturing Forecast (Units; No. of Satellites CY 2021-
2030)
Note: CY 2018-2020 values are historical, and CY 2021-2030 values are projection
based on planned missions, satellite constellations and replacement satellites.
Historically the revenue for satellite manufacturing has reduced in the last two years
owing to the reduction in number of satellites launched i.e.77.3% decrease. Frost &
Sullivan‟s estimates the Indian satellite manufacturing revenues to be $803.26
Million as of 2021, which is expected to grow up to $1061.5 Million by 2030, growing
at a CAGR of 3.15%. The 0-75Kg segment is estimated to be $0.95 Million as of
2021 and is expected to grow up to $3.39 Million by 2030, growing by a CAGR of
15.18% for the Indian Market.
Figure 44 - Indian Satellite Manufacturing Revenue Forecast CY 2021-2030
Note: CY 2018-2020 values are historical and CY 2021-2030 are projections based
on number of satellites and manufacturing price per satellite based on mass class.
The demand for Indian market is mainly driven by civil government and commercial
sectors having a market share of 88.70% and 11.29% respectively. The Key
applications for the sector include IoT/M2M, Technology and Communication. In
case of IoT/M2M the demand is 100% from commercial players. For Technology, the
demand is mainly driven by Civil Government having a market share of 99.92%.
Global Market Opportunity for Ground Stations
Figure 45 - Global Ground Station Equipment Forecast (CY 2021-2030)

Note: CY 2018-2020 values are historical, and CY 2021-2030 values are projections.
In 2018 the revenue for ground station equipment was $93.08 Billions and grew to
$95.88 Billions in 2020 growing at CAGR of 1.49%. This increase is consequence of
increase in demand for ground station equipment with planned ground stations being
built to support additional capacity demand from small satellite constellations.
The total market opportunity for ground stations in the period 2021-2030 is about
$1313.26 billion, growing from $98.17 Billion in 2021 to $176.85 in 2030 at a CAGR
of 6.76%. The global demand is driven mainly from the additional ground segment
capacity required for new satellite constellations. New small satellite operators such
as RBC signals, SpaceIt are deploying aggregator models which tap excess ground
segment capacity through a single platform. The model allows the satellite operators
to utilize multiple ground stations customized to their requirements, enabling them to
have multiple communication points with the satellite without higher investment in
ground infrastructure. However, companies which have vertically integrated model
such as SpaceX are setting up their own ground stations. With projected demand for
about 39033 satellites to be launched from 2021-2030, the number for ground
stations will also increase.
The Fixed satellite service (FSS) equipment is expected to grow at a CAGR of
4.71%, while the Mobile Satellite Service (MSS) is forecasted at a CAGR of 12.34%,
indicating that the increasing trend of adoption of MSS equipment due to LEO
constellations.
Indian Market Opportunity for Ground Stations
Figure 46 - Indian Ground Station Equipment Forecast (CY 2021-2030)

Note: CY 2018-2020 values are historical, and CY 2021-2030 vales are projections.
The demand for ground stations in India is mainly driven by ISRO. ISRO has well
established ground stations and will require establishing further ground stations for
the growing number of launches. Another factor driving the demand for ground
station equipment in India will be operators planning to provide services in India from
their satellite constellations. For e.g., Bharti Enterprises is planning to build ground
stations across north, south, and western region of India for providing connectivity
services domestically using OneWeb constellation. Figure 48 shows the opportunity
for Indian Ground Station equipment. The Market has been growing steadily from
$1.01 Million in 2018 to $1.06 Million in 2020 i.e., growing at a CAGR of 2.45%.The
market size is estimated to be about $01.09 Million in 2021 growing to $1.54 Million
in 2030 at a CAGR of 3.91%. The opportunity in short term is mainly from FSS
equipment.
Global Market Opportunity for Testing Equipment

The demand for testing equipment is mainly at two stages. One is functional and
other is end of the line testing. The demand for end of the line testing is expected to
grow due to serial production of satellites which will require continuous testing after
satellite integration. In addition, the demand for testing players will be driven by
launch service providers as 62.77% of launch vehicles are under development stage
and will need testing equipment. The market for testing equipment for space was
about $3.06 Billion in 2018 and $4.71 Billion in 2020 growing at CAGR of 24.07%.
The spike in 2020 is consequence of multiple deep space missions planned and
serial production of satellites. The demand for testing Equipment is shown below and
is projected to be $2.22 in 2021, and expected to grow to $7.34 in 2030 at a CAGR
of 14.21%.
Figure 47 - Global Testing Equipment Revenue Forecast (CY 2021-2030)
India Market Opportunity for Testing Equipment
Figure 48 - Indian Testing Equipment Revenue Forecast (CY 2021-2030)

Note: 2018-2020 values are historical, and CY 2021-2030 values are projections.
The market Size for testing equipment in India in 2018 was $46 Million and $11.56
Million in 2020. The demand for 2020 was minimal due to COVID-19 impact on the
domestic industry owing to the budget cuts of ISRO, and only 02 satellites being
launched. The demand for 2021 is estimated to grow to $60.24 Million which is due
to the pent-up demand from 2020 and the planned launches in 2021. This demand is
expected to grow to $79.61 Million in 2030 at a CAGR of 3.14% indicating an overall
positive trend. The sudden increases observed in years 2023, 2025, 2026, and
2029-2030 coincide with the testing requirements for end of line testing for serial
production of satellites.
KEY INDUSTRY GROWTH DRIVERS
Atmanirbhar Bharat
ISRO’s efforts to enable domestic private players coupled with ‘Atmanirbhar Bharat”
initiative will foster strong growth environment for domestic players.
ISRO‟s model has evolved and now also involves external agencies to conduct
multiple programs and missions simultaneously. The „Atmanirbhar Bharat‟ initiative
has distinct focus on domestic players which will drive prioritization of Indian
participants over international supply chain for procurement. International players will
remain eligible for the opportunities in case they have partnership with domestic
players. This indicates the opportunity for increase in international partnerships and
inflow of investment. ISRO „s focus on enabling domestic private players through
outsourcing of space systems manufacturing and Atmanirbhar Bharat provisions will
create strong environment for growth opportunities for Indian participants.
Expansion of domestic private space industry landscape
Entry of private players in the market, the demand for manufacturing, testing and
ground equipment will grow across system, subsystem, and component levels due to
expansion of the customer base investing in space capabilities other than ISRO. This
will further increase the opportunities for international space market participants and
investment groups as technological and financial support from the global space
value chain participants will be in demand.
Setting up of NSIL and In-SPACe

Expansion of commercialization effort by government by setting up of New Space
India Limited (NSIL) is enabling the growth of space industry ecosystem.
Department of Space is creating opportunities to engage with existing and new

private participants for Indian space program by evolving from supply-based model
to demand-based model. New Space India Ltd (NSIL) was created for expansion of
commercialization effort and integration of new space participants with Indian space
programs and exploratory missions. This has created multiple opportunities for
private space participants. Data Patterns is likely to benefit from these new
opportunities from new model.
Figure 49 - Key Industry Drivers for Satellite Manufacturing, Ground Stations and
Testing Equipment Markets.
OPPORTUNITIES FOR DATA PATTERNS SPACE PORTFOLIO
Satellite Manufacturing
Data Patterns has proven reliability of being a supplier to ISRO and has gradually
expanded its role from sub-system manufacturer to complete satellite manufacturer.
The technical competence and reliability positions Data Patterns well to compete in
domestic and global space markets. New participants need to prove their product
reliability through successful satellite launch and operations, but, as Data Patterns
has worked with ISRO on multiple missions they have competitive edge over their
competitors in the new space industry.
Data Patterns has an experience of design and development of hyperspectral
satellite for Pixxel. During the process of development, Data Patterns has
successfully developed subsystems and components such as on-board computer,
electric power systems, Li-ion batteries, power distribution module, transmitter and
transceiver, Gyroscope, magnetometer, sun sensor, magnetic wheels,
magnetorquers, antenna and GPS receiver. The demand for each of the segments is
as shown below.
Figure 50 - Global Satellite Manufacturing Components Forecast CY 2021-2030)
The global demand for on-board computers is about $1.82 Billion in 2021 growing up
to $6.08 Billion in 2030 growing at CAGR of 14.34%. The demand for on-board
computers is mainly driven by the 150-250 Kg mass class followed by >2500 Kg
mass class. The demand from 0-75 Kg is growing from $31.28 Million in 2021 to
$73.98 Million in 2030 growing at a CAGR of 10.04%. The exponential growth is a
consequence of increased of number of satellites planned within this mass class.
The respective Indian opportunity is about $29.79 Million in 2021 and about $51.18
Million in 2030 growing at a CAGR of 6.2%. One of the key features that is becoming
crucial for on-board computers to support on satellites is software reconfigurability in
order to meet changing demand of the end users. The software defined satellites
allow alteration of satellite parameters such as power, coverage, frequency,
bandwidth with satellite being in-orbit. This element of flexibility to meet demand of
end users is quintessential for satellite operators to cater to end user requirements.
Thus, Data Patterns on-board computer system supporting on-board software
upgradation and full redundant configuration with two OBCs and redundant bus
switch module, permits satellite software reconfigurability and increased system
redundancy. This is in-line with the emerging global trend which positions Data
Patterns well to compete in global market in addition to domestic market.
The demand for power electronics is about $22.45 Million in 2021 and grows up to
$163.34 Million growing at a CAGR of 24.67%. The demand for this component is
mainly driven by large satellites >2500 Kg about 40.79% followed by 150-250 Kg
satellites at 19.82% and 0-15Kg at 10.30%. The key application driving the demand
for 0-15 Kg segment is Earth observation. Data Patterns previous experience with
hyperspectral satellite positions it well to cater to demand for power electronics for
the key application. Data Patterns component portfolio offering includes electrical
power systems, power distribution modules and power distribution expander.
The demand for batteries is growing at CAGR of 17.22% globally from $360.73
million in 2021 to $1.50 Billion in 2030. The demand for batteries is mainly driven by
150-250 Kg mass class with market share of 45.84%. The opportunity for 0-75 Kg
segment is about 2.6% of the total market revenue. Batteries are critical component
to operation of satellite and hence margin of error should be low. This demands
tedious qualification and certification process to prove their ability to sustain in
extreme environmental conditions, extreme temperatures, vacuum, vibration shocks
and radiation. As light weight batteries are necessary with balance between higher
specific energy and specific power, lithium-based batteries are preferred, as lithium
is most electropositive metal with light weight. Also, they offer lower self-discharge
rate and longer life cycle. Data Patterns product offering is Li-ion batteries for small
satellites which are preferred solution. Thus, Data patterns is well positioned to offer
batteries both domestically and globally.
The demand for transmitter, receiver and transceiver is growing at CAGR of 10.63%,
10.63% and 10.48% respectively. Key mass classes for transmitter are 0-250 Kg
with key application being communication and user segment is commercial. Data
Patterns offers S-Band and UHF-Band payload transmitter modules which are
commonly used on nano satellites due to their ability to transmit easily in bad
weather or rain. Ability of Data Patterns to offer the solution at lower cost places
them in unique position for offering this solution in the global and domestic market.
The demand for gyroscopes is growing at CAGR of 11.25%, growing from $524.88
Million in 2021 to 1.37 billion in 2030. Key application for 0-15Kg mass class Earth
Observation and demand is highest from Europe and Asia Pacific. With its
experience working with key players in the region Data Patterns is positioned well to
address the regional and domestic demand.
Figure 51 - Indian Satellite Manufacturing Components Forecast (CY 2021-2030)

The demand for magnetometer is growing at CAGR of 12.24%. Highest demand is
from 0-15 Kg mass class with key application being Earth observation and IoT/M2M.
With its existing product developed Data Patterns is well positioned to address the
demand for magnetometers. The demand for magnetic wheels and magnetorquers is
growing at CAGR of 10.94% and 13.08% respectively. The demand for antenna is
about $84.3 Million in 2021 and grows up to $278.34 in 2030 growing at a CAGR of
14.19% and Indian demand is growing at 4.58%. Data Patterns is well positioned in
to compete in global market due to their experience in building subsystems and
components and offering them at lower cost.
In total Data Patterns is uniquely positioned in global and domestic market to offer
complete satellite solution due to their experience working with ISRO and private
players. In addition, they have ability to scale the manufacturing quickly for serial
production, thus being an attractive choice for satellite operators with satellite
constellations, enabling them access to low-cost solution in shorter timeline.
Ground Stations
The demand for satellite ground station equipment is mainly driven by upcoming
demand for satellite constellations being planned and launched. As the number of
satellites increases the necessity to ground station capacity is increasing in-turn
increasing demand for ground station equipment. Data Patterns product portfolio
mainly includes antenna in VHF, UHF and S-Band, which is frequently used
antennas for nanosatellites. Data Patterns experience working with ground station
equipment positions it uniquely to offer products at lower cost and higher reliability
suitable for the small satellite operators.
In addition, Data Patterns has experience of working on upgrades of 6 tracking
radars for ISRO with contemporary Electronics and software algorithms. They have
developed coastal surveillance radar for ISRO, which is the first in India. They have
future ready products such as X-Band Doppler weather radar, C-Band Doppler
weather radar and wind profile radar. With the experience of building the complete
solution for weather radars, Data Patterns is well positioned to build similar solutions
for domestic and international market.
Testing Equipment
Data Patterns has successfully built cable tester for Gaganyaan mission and
delivered to ISRO in 2020. Other products developed include single axis and three
axis test station for ring laser gyro and strain data logger system. ISRO requires
various types of automated test equipment for development of its test benches for
the Polar Satellite Launch Vehicle (“PSLV”) and Geo Stationary Launch Vehicle
(“GSLV”). All the electronic systems on the PSLV and GSLV as well as some
satellite subsystems are tested by ISRO using such ATE. A robust service network
ensures uptime of all this equipment. Data Patterns is the only company in India to
have developed these complex ATE modules and is well established to capture the
opportunity.
Global and Domestic Demand for Indian Space Players

Satellite Manufacturing:
With multiple Indian space market participants supporting ISRO with serial
production of satellites and related space hardware, the Indian market landscape
has evolved such that it is now ready to integrate with the global space industry
ecosystem, especially the satellite manufacturing value chain. Companies like Data
Patterns being able to develop fully redundant small-satellites for ISRO and New
Space startups indicate that the Indian space market is already equipped to support
mega-constellation programs through relevant, cost-effective serial production
capabilities, specifically focusing on small-satellites.
Ground Station Services:
With the rise of NewSpace startups and ISRO efforts covering small-satellites for
LEO missions, the need for suitable ground station services will grow moving forward
in India. This will be in sync with what is already a rising demand at the global level.
Multiple international ground station operators will be expanding their ground station
network and this will create the demand for suitable ground station equipment and
related hardware. The Indian space industry participants having enabled ISRO for
decades using indigenous capabilities already stand relevant and eligible to support
such expansion plans with relatively cheaper solutions which will attract customers in
the global space industry. Apart from the ground station operators, multiple
constellation operators are establishing their own ground station infrastructure which
will further add to the growing demand for ground station equipment globally.
Space System Testing Equipment:
Serial production of satellites is a paradigm shift in the space industry and with
assembly line style of manufacturing, testing and validation is expected to grow as
well. Across functional and end-of-line testing, significant testing and validation
activities are expected to be vertically integrated with the assembly lines and this will
create opportunities for space system testing service providers. Satellite
manufacturers installing serial production lines will rely on testing specialists to
achieve their respective vertically integrated testing and validation capabilities. This
will create the demand for specialized space system testing equipment across
functional and end-of-line testing segments. While acoustics and vibration testing
capabilities will remain prominent within the launch vehicle manufacturing industry,
more opportunities will come from the satellite manufacturing domain for space
electronics testing.
COMPETITION ANALYSIS
The Indian defence industry is rapidly evolving into a self-sustaining one with
companies and DPSUs moving towards specialising into defence primes, integrators
and component suppliers. Similarly, the space industry is expanding with new space
participants offering services which were previously offered by ISRO such as launch
services, satellite operations and downstream services. The shift is driven by
national space agency transitioning from being the sole player offering end to end
solutions to being an enabler for private space players.
Several prolific private sectors Defence Technology Industrial Bases (DTIB),

including those in the United States and the United Kingdom, grew in stages with
private companies starting out as suppliers to government majors and military
research facilities. Over time component manufacturers evolved into integrators and
later into solution providers (for eg: a company that used to specialise in developing
RF components would build a complete radar system). And as defence primes
developed independent platform building capability, this new “division of labour”
within the industry became more streamlined and specialised, resulting in greater
industry revenues and profit. Competition in the Indian defence industry is in a state
of flux, but moving towards consolidation and specialisation. Moving forward DPSUs
are focusing on specialisation and integration and subcomponent manufacture is
being outsourced to the private industry, resulting in more opportunities for the latter
segment. Driven by new policies and government initiatives that are more
predisposed towards procuring equipment from the private sector, competitors that
already have strong business relationships with DPSUs, DRDO and larger private
defence companies, as well as the R&D and manufacturing capability to build end –
to-end solutions are likely to emerge as winners.
Figure 52 - Indian Defence Suppliers - Anticipated Future Positioning

The financial data of some Aerospace and Defence companies is as below:
FY 2021 FY 2020 FY 2019

Net Net Net
Company Net Profit Profit/ Revenues Net Profit Profit/ Revenues Net Profit Profit/
Revenues (INR Cr)
(INR Cr) Revenues (INR Cr) (INR Cr) Revenues (INR Cr) (INR Cr) Revenues
(%) (%) (%)
L&T72 73316 11337 15.46% 82384 6679 8.11% 82287 7491 9.10%
BEL 14064 2065 14.68% 12921 1794 13.88% 12085 1927 15.95%
Data
224 55.57 24.81% 156.1 21.05 13.48% 131.06 7.70 5.88%
Patterns
Paras
Unknown Unknown Unknown 149 19.66 13.19% 157 18.97 12.08%
Defence
Mahindra
Defence Unknown Unknown Unknown 307.33 18.96 6.17% 285.00 32 11.23%
Systems
Tata
Advanced Unknown Unknown Unknown 968.7 59 6.09% 511 34.06 6.67%
Systems
Astra
Microwave 589 24 4.07% 462 47 10.17% 286 13 4.55%
Products
Godrej &
Unknown Unknown Unknown 11257 224.1 1.99% 11051 229.26 2.07%
Boyce
Centum
823.3 13.1 1.59% 898.6 27.8 3.09% 937.5 48.4 5.16%
Electronics
Alpha Design
Unknown Unknown Unknown 399 10.4 2.61% 281 49 17.44%
Technologies
Adani
Aerosapce & 1.99 -0.7 -35.18% 2.74 -1.77 -64.60% Unknown Unknown Unknown
Defence Ltd.
CoreEl
Unknown Unknown Unknown Unknown Unknown Unknown 108.63 0.98 1%
Technologies
Mistral Unknown Unknown Unknown 142.91 12.26 8.58% 161.89 17.78 11%
Table 15 - Financial Data of Indian A&D Companies 1
72
Standalone figures are depicted here, not consolidated group figures
FY 2021 FY 2020 FY 2019
Company EBITDA EBITDA EBITDA
RoCE RoE RoCE RoE RoCE RoE
Name EBITDA Margin EBITDA Margin EBITDA Margin
(%) (%) (%) (%) (%) (%)
(%) (%) (%)
L&T 7335 10 13 19 6940 8 16 13 7742 9 14 15
BEL 3181 23 28 19 2734 21 26 18 2865 24 32 21
Data
95 41.75 34.7 27 47 29.50 23.4 13.7 27 20.3 12.5 5.8
Patterns
Paras
Unknown 41.68 27.01 14.9 16 45.67 27.98 21.27 20
Defence
Mahindra
Defence Unknown 528.28 16.6 13.4 6.6 267.72 9.3 7.2 12
Systems
Tata
Advanced Unknown 191.5 18.52 3.96 0.3 25.5 4.84 0.47 0.2
Systems
Astra
Microwave 66 11 9 4 90 19 13 8.5 33 12 4 2.5
Products
Godrej &
Unknown 342.33 3.040822 3.458 1.5 355.88 3.22018 3.459 1.2
Boyce
Centum
95.3 11.6 9.5 7.6 113 12.6 14.3 9.7 110.1 11.8 14.9 13
Electronics
Alpha Design
Unknown 42.5 10.4 1.3 0.1 42.8 14.7 5.7 1.1
Technologies
Adani
Aerosapce & Unknown
Defence Ltd.
CoreEl
Unknown 101.52 9.3454 15.83 3
Technologies
Mistral Unknown 22 15.12 16.03 12 24.83 15.05 24.44 1973
Table 16 - Financial Data of Indian Companies 2
 Astra Microwave, Alpha Design Technologies and Data Patterns have shown
consistent increases in the three years whilst Centum Electronics revenues have
dropped. Paras Defence‟s latest revenues are unavailable, but a revenue
expansion over 2019-20 can be anticipated. Comparing the profitability of these
companies as a percentage of revenues yields a clearer picture of company
performance.
 Data Patterns‟ financial performance was unaffected by the pandemic as its net
profitability soared by approximately 164% from 2019-20 to 2020-21 time frame,
emerging as the company with the highest profitability growth among those
73
EBITDA Margin is defined as EBIDTA/Net Revenues. Return on Capital Expenditure is calculated by dividing
Earnings before Interest and Taxes by employed capital. Return on Equity is calculated as Net Income divided
by shareholders’ equity
compared above. During the last year Astra Microwave and Alpha Design
Technologies witnessed a drop in profitability. It‟s also important to note that
during the pandemic year the company‟s revenues grew by 43% (from 2019-20
to 2020-21), the highest among all companies covered in the analysis. The
company‟s EBIDTA (Earnings before Interest, Taxes), Depreciation &
Amortization margin, Return on Capital Employed and Return on Equity also
were the highest during the same time-frame. This made Data Patterns as one of
the fastest growing company in Defence and Aerospace Electronics sector in
India with excellent margins and return ratios. It‟s also important to note that
during the pandemic year the company‟s revenues grew by 69% - the highest
among all companies covered in the analysis. The company‟s EBIDTA (Earnings
before Interest, Taxes), Depreciation & Amortization margin, Return on Capital
Employed and Return on Equity also were the highest during the same time-
frame. This made Data Patterns as one of the fastest growing company in
Defence and Aerospace Electronics sector in India with excellent margins and
return ratios.
Competitor Profiles
Larsen & Toubro
Title Brief
Background L&T strongly diversified into the defence segment in the mid-
1980s when the company started working with DRDO and on
the naval modernization programme 74. The company is at the
forefront of the Indian defence industry and is quickly evolving
into a capable defence prime, capable of developing and
manufacturing end to end solutions for the military.
Capability Brief75 Major facilities include
1. Submarine hull-building facility and an Armoured Systems
manufacturing, integration & testing facility at L&T‟s Hazira
Complex (near Surat)
2. Modern shipyard at Kattupalli (near Chennai)
3. Aerospace manufacturing shops for rocket motors for
India‟s Space Launch Vehicles at Powai and Coimbatore
4. Precision Manufacturing & Systems Complex for
Aerospace & Missiles manufacturing at Coimbatore
5. Advanced Composites facilities at Vadodara and
Coimbatore
6. Strategic Systems Complex for Weapon & Engineering
Systems and Sensors at Talegaon near Pune • Strategic
Electronics Centre at Bengaluru
74
http://www.spslandforces.com/story/?id=623&h=LandT---Leading-Indigenous-Defence-Manufacturing-
Through-Significant-Investments-In-RandD
75
https://investors.larsentoubro.com/pdf/MDA%202019-20%20-%2003%20Defence%20Business.pdf
Title Brief
7. L&T also operates a facility at Visakhapatnam under the
Government Owned Contractor Operated (GOCO) model
8. R&D centres are present at Powai (Mumbai) and
Bengaluru
9. Design and Engineering Centres are also present in Powai
and Chennai.
Product Portfolio 1. Guns
2. Armoured Systems
3. Missiles
4. Aerospace Systems
5. Avionics,
6. Sensors and Robotics
7. Submarines and Underwater Platforms
8. Weapon and Engineering Systems
9. Unmanned Systems
10. Radar Systems
11. Torpedoes
12. Rocket engine motors
13. L&T Valves: critical flow control solutions
14. Heat Shields.
Recent Reported 1. One of two shortlisted for the Indian Navy‟s P-75A
Contracts/ 2. Order for 54 fast interceptor boats (completed)
Opportunities 3. L&T, along with BEML and TPCL, has received orders
from the MoD to supply 4 regiments of Pinaka Weapon
Systems worth $350 million
4. L&T, in partnership with Hanwah, won a global competition
to supply 100 units of K9 Vajra –T 155 at a price of $625
million
5. L&T was also recently awarded a US Government contract
to build a supply vessel for Chile
6. L&T delivered S200 strap on booster for GSLV Mk III for
Ganganyaan mission ahead of schedule in November
2020.
Relationships 1. Relationship with DRDO started with the naval
indigenization programme
2. Partnering with DCNS to build Scorpene submarines in
India
3. Joint venture with MBDA to develop weapon systems 76
4. L&T and HAL consortium working with ISRO for
manufacturing and assembly of PSLV.
Major Business 1. The focus is mainly on the Indian Naval and Coast Guard
Focus Areas segment and the Indian Army
2. It has also entered the C4ISR and battlefield domains with
regard to land forces. L&T was a key competitor in the
much-delayed Battle =field Management System segment
3. Space focus is mainly on manufacturing and assembly of
76
Title Brief
PSLV for ISRO and manufacturing key satellite
components.
Bharat Electronics Ltd.
Title Brief
Background BEL was set up in 1954 to boost India‟s indigenous capability
to produce defence electronics and solutions. The company,
which was initially set up to develop basic communication
equipment, today provided end to end C4ISR solutions. BEL
works closely with DRDO and other Indian defence companies
to build products currently fielded by the Indian Armed
Forces77.
Capability Brief Major facilities include
1. Manufacturing unit in Bengaluru focusing on military
communications, NCW, ISR solutions, EW, UAS and
missiles
2. Facility in Ghaziabad focuses on sitcom, microwave
components, radars, antennae and network systems
3. Centre in Pune focuses on UGVs, batteries, electro optics
4. Centre in Machilipatanam specialises in electro optics,
especially Night Vision Devices
5. Panchkula facility production on tactical communication
and encryption products
6. Facility in Chennai focuses on tank electronics and
optronics
7. Kotdwara facility focuses on communications solutions
8. Hyderabad facility focuses on electronic warfare
9. Navi Mumbai facility focuses on homeland security
systems
Product Portfolio 1. Communications solutions – SDR, SatCom, datalinks,
nodes, encryption modules
2. Land based radars – surveillance, weapon-locating, fire-
control, secondary surveillance
3. 3D Naval radars, missile defence radar, surface
surveillance radar
4. C4ISR solutions
5. EW, ELINT, COMINT, SIGINT, MULTIINT solutions
6. Avionics
7. Optronics
8. Akash missile systems
9. Combat management systems
10. Simulators
11. Batteries
77
https://www.ddpmod.gov.in/defence-public-sector-undertakings
Title Brief
12. Sonar systems
Recent Reported 1. Supplying ship-borne software defined radio solutions to
Contracts/ the Indian Navy; contract executed in 2021 worth over INR
Opportunities 1000 Cr.
2. Supplying laser dazzlers to the Indian Navy for counter
UAS operations.
Relationships 1. Major supplier to DRDO and ISRO
2. Have exported to various equipment to countries such as
USA, Turkey, Israel, Singapore, Russia, Germany, Italy,
France, UAE etc.
3. Has set up a JV with Thales to develop advanced radar
systems
Major Business 1. End to end C4ISR solutions; however, the company is
Focus Areas focusing more on product development and integration
with the intention of outsourcing a large proportion of
component/ subsystems manufacture.
Data Patterns
Title Brief
Background Data Patterns was established in 1985 as a defence
electronics company and has evolved into end-to-end military
solution provided. The company‟s extensive COTS capabilities
have helped make the firm a critical supplier to DRDO, ISRO
and several DPSUs. The company has been positioning itself
through capability expansion and R&D advancements into a
key supplier for most upcoming military projects in India, whilst
also developing solutions with export potential. The company
already supplies components to defence primes in South
Korea and Europe.
1. Manufacturing, design and engineering facility in Siruseri
infrastructure in Siruseri. The facility also caters to cabling,
testing & evaluation, mechanical and display integration,
avionics assembly and quality control.
Product Portfolio 1. Radar solutions – surveillance, weather and tracking
radars
2. Platform electronics for land, air and sea
3. EW, COMINT and ELINT solutions
4. Communication equipment
5. Radar warning systems
6. Seekers for missiles
7. Cockpit displays
8. UAS
9. Fire control systems for missiles and torpedoes
Title Brief
10. Visual display units
11. Small satellites
12. Automatic testing equipment (ATE)
13. Ground station Antenna
14. Launch vehicle tracking radars
15. Weather radars
Recent Reported 1. Won an INR 380 Cr contract to install 9 precision radars in

Contracts/ Naval and Air Force stations.
Opportunities
Relationships 1. Supplier relationships BEL, ISRO and DRDO
2. Supplier relationships with foreign defence primes
Major Business 1. C4ISR end to end solutions
Focus Areas 2. Electronic Warfare
3. Weapons systems (seekers)
4. Satellites
5. Ground equipment
6. Automatic Testing Equipment
Paras Defence & Space
Title Brief
Background Paras Defence has been operating in the defence and space
domain for 40+ years and is positioned as an IDDM company.
The company has strong capabilities in C4ISR and in niche
technologies such as EMP protection.
1. Has manufacturing facilities in Mumbai
Product Portfolio78 1. Heavy engineering solutions including flow formed tubes,
titanium based manufacturing and radar cooling
assemblies
2. Optics solutions including diffractive gratings, mirrors and
optical domes
3. Military grade control systems
4. EW subsystems
5. EMP hardening solutions
6. Opto-electro-mechanical assemblies for satellites, nano
satellites.
Recent Reported 1. Unknown
Contracts/
Opportunities
78
https://www.parasdefence.com/project-profiles/
Title Brief
Relationships 1. Supplier relationships with ISRO, DRDO, BEL, HAL,

Cochin Shipyard, GRSE, BDL, Brahmos, OFB, IAI, Elbit
Systems, Rafael Advanced Defence Systems, Safran, and
L&T
2. Has a technology partnership with Holland Shielding
Systems BV for EMP solutions
3. Partnership with HPS on development of space antennas
4. Partnership with Genesys Aerosystems for avionics suites
5. Partnership with Curtiss-Wright for turret stabilisation
technologies
6. Partnership with DIEHL for counter-drone solutions
Major Business 1. C4ISR subsystems, EMP protection, EW and heavy
Focus Areas engineering
Mahindra Defence Systems
Title Brief
Background Mahindra Defence Systems‟ major focus area is the production
of armoured vehicles. Through its joint venture with
Telephonics, the company also develops and integrates ISR
equipment. The company also provides up-armouring services
for clients, especially for those in the Middle East region.
Capability Brief79Major facilities include
1. Special vehicles production facility in Faridabad
2. Centre in Pune that manufactures sub-systems, weapon
systems with associated electronics, and related
armament systems
3. Mahindra Telephonics has a manufacturing facility in
Prithla, Haryana
Product Portfolio 1. Land Platforms – APCs, Light Tactical Vehicles, MRAP
2. Up-armoured vehicles
3. ISR equipment and defence electronics
Recent Reported 1. Supplying 11 airport surveillance radars for the Indian
Contracts/ Navy and Indian Coast Guard
Opportunities 2. Won a contract to supply 1300 light tactical vehicles to the
Indian Army over the next 4 years80
3. Assembling and supplying M777 howitzers to the Indian
Army81
Relationships 1. It has a JV with Telephonics Corp. US for developing
79
80
https://www.businesstoday.in/latest/economy-politics/story/defence-ministry-signs-deal-with-mahindra-
defence-systems-to-procure-1300-light-combat-vehicles-291428-2021-03-22
81
https://www.hindustantimes.com/india-news/m777-regiment-to-get-3-made-in-india-guns/story-
xhNr4drnZCckqN3qErlfyK.html
Title Brief
radar and communication and surveillance equipment.
2. It has a partnership with GE and Magellan Aerospace for
structural assemblies.
3. It has a JV with Airbus to make military helicopters.
4. It has a partnership with Ultra Electronics to manufacture
underwater warfare equipment.
5. Has MoUs with ShinMaywa Industries Limited, Japan,
manufacturer of Amphibious Aircraft US-2 amphibious
aircraft and Aeronautics Limited Israel to manufacture
shipborne UAS
Major Business 1. Major focus is on land platforms and radar systems
Focus Areas 2. Secondary focus seems to be on ISR solutions
3. The company is keen to develop unmanned solutions as
well
Tata Advanced Systems
Title Brief
Background Tata Advanced Systems is Tata Group‟s A&D focused
establishment. The company is currently undergoing a
consolidation to merge defence oriented verticals of Tata
Motors and Tata Power Strategic Engineering Division.
1. Tata Sikorsky joint venture in Hyderabad
2. Tata Lockheed Martin Aero structures facility in Hyderabad
3. Homeland Security focused facility in Gurgaon
4. Facilities focusing on radar, EW, communication systems
in Hyderabad
5. R&D division in Mumbai
Product Portfolio 1. Missile Systems and sub-systems
2. Radar Systems and sub-systems
3. Command & Control Systems
4. Aerospace & Aero-Structures
5. Unmanned Aerial Systems
6. Optronic Systems
7. Homeland Security Solutions
8. Satellite and launch vehicle components (solar panels,
interstage assemblies, deck plates, adaptors)
Recent Reported 1. Tata Power SED won a $243.1 million contract to
Contracts/ modernise 30 IAF bases.
Opportunities 2. Tata Power SED, with L&T, is competing for the high-
value BMS contract.
3. The company built control systems for the indigenous
Title Brief
Arihant Class nuclear submarine.
4. Aurora Integrated Systems, a subsidiary of TASL, was
awarded a contract by the Indian Army to supply
49 mini UAVs.
5. Airbus Defense and Tata Aerospace & Defence will jointly
execute a project to equip the IAF with 56 C-295 transport
aircraft in a deal worth $2.5 billion.
6. Lockheed Martin signed an agreement with TASL to
produce the F-21 in India for MMRCA.
Relationships 1. It has entered into a JV with Sikrosky to manufacture
approximately 4,000 helicopter cabin parts.
2. It has a JV with LM to manufacture aero structures.
3. It operates a 100%-owned subsidiary NOVA Integrated
Systems Ltd., which will focus on missile systems, radars,
UAVs, optics, and HLS.
4. It has a JV with ELTA Systems, Israel to collaborate on
developments in radar, communications, and EW,
homeland and surveillance systems.
5. It has a partnership with GE and Magellan Aerospace for
structural assemblies.
6. Tata Lockheed Martin Aero structures Limited is a
partnership between TASL and Lockheed Martin to
produce the C-130J Super Hercules transport aircraft.
7. The firm has a partnership with Rockwell Collins to
develop
software-defined radio systems.
Major Business 1. UAS and other airborne platforms
Focus Areas 2. C4ISR
3. Satellites
Astra Microwave Products
Title Brief
Background Astra Microwave Products was formed in 1991 as a solution
provider in the domain of RF/Microwave/Digital electronics.
The firm occupies segments in defence, home land security,
space and civilian sensor domains. Several subsystems
developed by the company are operational on Indian satellites
in space.
1. Three production units and two R&D units that also include
an exclusive space qualified facility82
2. Facilities are also capable of assembly and functional/
environmental testing
82
http://www.astramwp.com/?page=about-us
Title Brief
Product Portfolio83 1. Subcomponents for radars, EW and telemetry
2. Perimeter intrusion detection solutions
3. Meteorology solutions
4. Air traffic management radar solutions
5. Space Electronics
Recent Reported 1. Previous contracts included subsystem supplies to Israel
Contracts/ Aerospace Industries, and Italy's SIAE Microelectronica
Opportunities
Relationships 1. Bhavyabhanu Electronics Private Limited (BEPL) is a fully
owned subsidiary focused on providing design,
development, testing and evaluation of defence electronics
2. Aelius Semiconductors Pvt. Ltd is a Singapore based
subsidiary that focuses on development of advanced
semiconductors based solutions including those using
GaN
3. Has a JV called Astra Rafael Comsys Private Ltd. (ARC)
with Rafael Advanced Defence Systems to explore Make
in India opportunities d in the fields of Tactical Radio
Communication systems, Electronic Warfare Systems and
Signal Intelligence Systems84
4. Working with ISRO since 2008 for multiple satellite
missions.
Major Business 1. Major focus is on advanced microwave and C4ISR
Focus Areas solutions
Godrej & Boyce
Title Brief
Background Godrej & Boyce is a tier 1 manufacturer of components in the
space, aerospace and defence domains. The company started
working with ISRO in 1985 and currently builds engines for
India‟s major rocket systems. The company also builds
airframes, and precision and hi-tech aerospace components85.
1. Has a Centre of Excellence in Aerospace located in
Mumbai
2. Precision engineering facilities in Mumbai
Product Portfolio86 1. Liquid propulsion engines
2. Thrusters for satellites
83
http://www.astramwp.com/?page=products&subcategory=44sub
84
http://www.astramwp.com/?page=alliances
85
https://www.godrej.com/aerospace-and-defence
86
https://www.godrej.com/aerospace-and-defence
Title Brief
3. Composite materials
4. Airframes
5. Steering gears for naval vessels
6. Missile launchers
7. Counter-mine flailing systems
Recent Reported 1. Suppliers of composites and precision engineering
Contracts/ components that are used in LRSAM and Brahmos
Opportunities 2. Supplies missile engines to DRDO/ BDL
3. Won a $ 30 million contract to supply parts for Rolls Royce
engines87
Relationships 1. Business relationships with ISRO, DRDO and DPSUs
2. Supplier relationships with Honeywell, GE, Rolls-Royce,
and Boeing
Major Business 1. Rocket engines, airframes and precision engineering
Focus Areas components
Alpha Design Technologies
Title Brief
Background Alpha Design Technologies is a firm that is currently evolving

from producing subsystems for the military equipment to
developing solutions. The company has been involved in
platform upgrades, including supplying Missile Launch
Detection Systems for Mi-17 helicopters, Interrogator Friend/
Foe detectors etc. The company provides equipment and
upgrade services for all three branches of the Indian Armed
Forces. Adani acquired Alpha Design Technologies in 201988.
1. Assembly lines for opto-electronics, microwave
subsystems, communications solutions and machining in
Bengaluru
2. Creating a new satellite manufacturing facility with ISRO‟s
help
Product Portfolio89 1. Optronics & LRF Based Products
2. Laser Aiming Systems
3. Thermal Imagers & Fire Control Systems
4. Navigation Systems
5. Tactical Communication
6. Radar and C3I Systems
7. EW Systems
8. Simulators
87
https://www.industr.com/en/godrej-aerospace-launches-a-centre-of-excellence-to-enhance-manufact-
2327504
88
https://www.thehindubusinessline.com/companies/adani-enterprises-arm-acquires-alpha-design-
technologies/article26899360.ece
89
https://www.adtl.co.in/about
Title Brief
9. Microwave Components & RF Units

10. Aerospace
11. Ground equipment: Rail Mass Terminal (SATCOM
transceiver module), Power Module Unit, Indian Rail
Navigator
12. Very Small Aperture Terminal (VSAT)
13. Antenna Control System (ACS)
14. Satellite manufacturing and assembly.
Recent Reported 1. Currently upgrading Pechora missile and radar systems
Contracts/ for the Indian Air Force. Upgradation covers Radar
Opportunities Transmitter, Thermal Imager-based Electro-Optical
System, Communication equipment, upgradation of drive
chain, Control Cabin, Shelters, Cables, etc90
2. Manufacturing 500 VHF communication devices in
partnership with Elbit Systems to cater to requirements of
the armoured corps
3. Consortium of Alpha design technologies, BEL and Tata to
deliver assembly of 27 satellites for ISRO.
Relationships 1. JV with Elbit systems for manufacture of equipment and
sub-systems, assemblies, components and manufactured
parts for Opto-electronics, Tank Upgradation Programs,
UAVs, EW Systems, Communication Systems, etc91
2. JV with Elettronica, Italy, for production of Phased Array
Jammers
3. The subsidiary, Alpha-Tocol, manufactures aerostructures
and is a supplier to HAL
4. Contract with ISRO for manufacturing satellites,
establishing satellite manufacturing, integration, testing
and qualification facilities.
Major Business 1. Major focus is twofold – 1. Development of RF based
Focus Areas solutions for EW, communications and ISR solutions for
the military.
2. Development of subsystems and eventually full satellites
and ground systems as per ISRO‟s requirements
3. Advanced aerostructures
Adani Aerospace & Defence Ltd.
Title Brief
Background Adani accelerated its foray into defence after the initiation of
the “Make in India” initiative and has nurtured defence
relationships with several defence primes such as Saab over
90
https://www.adtl.co.in/news/upgrading-pechora-surface-to-air-missile-system-indian-private-firm-alpha-
design-wins-rs-591-crore-contract
91
https://www.adtl.co.in/joint-venture-subsidiaries
Title Brief
the past five years in order to position itself well for future
contracts. The company is focusing on both production of
subcomponents and development of platforms and has been
expanding its capabilities through acquisitions. The Group,
together with Israel Weapons Industries (IWI), acquired
Gwalior based PLR systems to acquire small arms production
facilities92. The company had also acquired Alpha Design
Technologies in 2018 to acquire EW/ microwave electronics
capabilities.
Capability Brief93 Major facilities include
1. Systems, Avionics & Aerostructure production facility in
Bengaluru
2. Air Defence cluster in Mundra
3. UAV R&D, assembly, and manufacturing unit in
Hyderabad
4. Small arms manufacturing facility in Gwalior
5. MRO hub in Nagpur
94
Product Portfolio 1. Radar subsystems
2. Defence electronics
3. Transmissions for land platforms
4. Electro-optics
5. Aerostructures (metal and composite)
6. EW
7. UAS/ Counter-UAS
8. Small arms
9. Simulators
10. MRO
11. Missile systems
12. Space systems
Recent Reported 1. Adani is competing for a major UAV replenishment
Contracts/ programme of the Indian Armed Forces
Opportunities 2. Adani has a tie up with Saab to compete for future fighter
recapitalization programmes of the Indian Ari Force
Relationships 1. Strong relationships with Israeli defence enterprises – Elbit
Systems for UAS and IWI for small arms
2. MoU with Airbus for collaboration on aircraft services
3. Has a tie up with Saab to manufacture the Gripen in India
(potentially predicated on IAF choosing the Gripen for
future recapitalisation)
Major Business 1. Integration and development of MALE and tactical UAS
Focus Areas 2. Small arms and missiles production
3. Establishing an MRO hub in India for commercial aircraft
and helicopters
92
http://plrsystem.in/
93
94
https://reports.adani.com/Adani-Defence-and-Aerospace/index.html
Title Brief
4. Subsystem development – C4ISR
5. Training and Simulation
CoreEL Technologies
Title Brief
Background CoreEL Technologies was founded in 1999 and focuses on
design and development, prototyping, digital products,
Integrated solutions, volume manufacturing, obsolescence
management, COTS products and semiconductor solutions for
defence and security applications95.
1. Has a manufacturing, testing and quality assurance facility
in Bengaluru
96
Product Portfolio 1. Product portfolio mainly consists of subcomponents for
radar, EW and sonar systems. End to end solutions
developed are limited, however the company produces
several advanced subcomponents – including, Exciters
and Receivers for AESA radars.
Recent Reported 1. Unknown
Contracts/
Opportunities
Relationships 1. Unknown
Major Business 1. Major focus is on advanced defence electronics such as
Focus Areas beam forming technology.
Centum Electronics
Title Brief
Background Centum was founded in 1993 and has carved a niche for itself
in several applications within electronics, including defence,
space, aerospace, communications, energy, medical,
transportation and automotive97. The company has three
business segments – Engineering R&D services, Electronic
95
https://www.coreel.com/about-us
96
https://www.coreel.com/products/aerospace-and-defence
97
https://www.centumelectronics.com/group-profile/
Title Brief
Manufacturing Services, and Build to Specification services.
1. Has a manufacturing, testing and quality assurance facility
in Bengaluru. The facility has a broad swathe of testing
and evaluation services, and is capable of design,
development and manufacturing of electronics products.
2. The company also has a manufacturing facility in Canada
and a design department in France
98
Product Portfolio 1. Within defence, the group focuses on electronic
subsystems for missiles, EW, communications and fire
control systems
2. For the commercial aviation sector, the company develops
UPS, embedded computers, inverter modules etc. Several
tier 1 aircraft manufacturers are among the company‟s
clients
3. Satellite bus systems, test tools, power management
systems, LRU and Data Recorders.
Recent Reported 1. Major supplier of defence subsystems to the DRDO and
Contracts/ ISRO
Opportunities
Relationships 1. Business relationships with DRDO, ISRO and defence
PSUs. Relationships with private Indian and overseas
defence primes unknown
Major Business 1. Major focus is on advanced defence electronics and
Focus Areas testing. Limited focus on developing end to end solutions
Mistral
Title Brief
Background Mistral focuses primarily on design and development
technology solutions99. The company focuses both on
solutions for defence and homeland security.
1. R&D/ manufacturing facility in Bengaluru
Product Portfolio 1. Radar modules
2. COTS boards and software
3. Bespoke processing boards
Recent Reported 1. The company sells bespoke solutions to DPSUs
Contracts/ 2. It has sold electronics equipment (such as geolocation
Opportunities modules) to US defence companies
98
https://www.centumelectronics.com/our-sectors/defence/
99
https://www.mistralsolutions.com/about-us/
Title Brief
Relationships 1. Company has strategic alliances with Qualcomm, Texas
Instruments, Microsoft, NXP, Wind River, Curtiss Wright
Defense Solutions, and Ansys100
Major Business 1. Focus is mainly on electronics subcomponents
Focus Areas 2. Recent forays include the UAS segment and converging
AI and machine learning into homeland security solutions
Product Capability Comparison

F&S’ comparison of key product related capabilities that will drive Indian defence
programmes revealed that Data Patterns has strong and balanced capabilities
across the 12 segments considered. The company is poised to take up emerging
opportunities to build India’s defence and space related capabilities.
Figure 53 - Product Capability Comparison of Major Indian Defence Stakeholders
 Data Patterns‟ capabilities stand well differentiated because the company has
100% in house design, development and manufacturing capabilities across the
segments depicted in Figure 51. The company has over 30 years of experience
in the industry and is among the few truly vertically integrated end-to-end
operators in the Indian defence industry.
 Its strong antecedents producing building blocks of technologically complex
products for the DRDO and DPSUs over the years have given the company a
strong foundation to build its own products.
Data Patterns is the only Indian company having design capabilities across the
entire spectrum of strategic aerospace and defence electronics solutions
including processors, power, radio frequency and microwave equipment,
embedded software and firmware and mechanical engineering. It offers products
100
https://www.mistralsolutions.com/about-us/alliances/
catering to the entire spectrum of aerospace and defence platforms including
space, air, land and sea. The company has end-to-end capabilities to build and
deliver complete systems, with their design and manufacturing capabilities being
completely in-house.
 As a proven supplier to defence primes in Europe and Asia Pacific, quality
standards of the company‟s products have exceeded expectations. With a strong
focus on COTS, the company produces 1000+ building blocks that can be used
on multiple end systems in defence and space. It also has strong software related
capabilities and can develop bespoke device drivers and firmware as required.
 As Data Patterns covers the entire spectrum of defence electronics, it is well
positioned to take part in land, airborne and naval defence programmes of India.
Several solutions, such as those in the company‟s radar systems portfolio, have
good export potential, especially to countries that seek a balance between
capability and value. The company‟s manufacturing approach is process driven;
utilising frameworks that enable it to rapidly shore up or reduce manufacturing as
per customer demand variations. The manufacturing infrastructure is certified by
international A&D OEMs.
 A key point of differentiation, separating the company from other Indian defence
companies, is how Data Patterns have developed its current product portfolio
after careful consideration of what future programmes the Indian Armed Forces
and ISRO are likely to execute. Essentially, the product portfolio stands “future-
proofed” and stands to gain from upcoming contracts.
 With a strong order book which is projected to grow from INR 579 Cr to INR 800
Cr by 2024, financials of the company look sound. Note that the company
maintained high profitability, even during the pandemic year. The company is
expected to be a major participant in at least INR 1500 Cr worth of contracts in
the next 3 years. With a skilled workforce of over 450 engineers and other highly
trained professionals with 15+ years of work experience, Data Patterns is poised
to address emerging industry challenges and requirements.
As also mentioned in the modernisation programs and component forecast sections,

Data Patterns is a strong contender/ supplier for the following programs:
 Arudhra Radar - Data Patterns won the Array Group Receiver Unit (AGRU) in
competition with Astra for this program101. They are expected to supply
approximately 55 units of AGRU/ Arudhra radar. This is likely to generate a
revenue of ~$ 2 million102 in the next 3-4 years based on the requirement
projection of IAF
101
https://saiindia.gov.in/uploads/download_audit_report/2015/Union_Compliance_Defence_Air_Force_Report
_38_2015_annexures.pdf
102
The estimation is based on Frost contracts database which includes prices of radars, component globally
and nationally
 Ashwini Low Level Transportable Radar (LLTR) - Data Patterns has been a
partner in development of these radars as a single vendor as a single vendor
including TR modules, AGRU, signal processor, etc103. Based on the size of the
program and components cost benchmarking as per Frost database, the
company is expected to realise revenue between $10-30 million in the next few
years. The range will depend on whether Data Patterns wins the entire radar
contract or the electronics components (Electronics is expected to cost 30% of
the total deal value as benchmarked from various programs , and indicated
earlier in the report
 Data Patterns has received single vendor orders from DLRL for development and
supply of all of the COMINT search receivers, Direction Finder, Monitoring
receivers for the Dharashakti program. This project is the development program
for large EW requirement for Deserts and Plains and has been nominated to
BEL. This places Data Patterns in a strong position to be an OEM for the entire
receiver systems with likely revenues of $ 50 million on complete execution of the
program.
 The expertise gained in the project would also position Data Patterns to cater for
airborne COMINT and ELINT equipment for various upgrades such as MI 17
Upgrades, Dornier Upgrades, Aerostat upgrades, and any new rotary wing
programs
 Data Patterns strong EW capability will also help them in supplying products for
light weight EW requirements. There is a heavy requirement of such products as
the mountainous borders are not adequately covered, and the same has been
prioritised due to the increased geo-political tension with China and Pakistan in
the North, and North eastern parts of India
 Data Patterns has delivered an airborne surveillance radar (all of the hardware)
for helicopters and fixed wing aircrafts to Electronics and Radar Development
Establishment (LRDE on) a single vendor basis. LRDE is expected to flight test
this radar in the next few months, and will be likely inducted in Navy‟s Dornier
upgrade and new helicopter programs.
 Data Patterns is also a part of the Radar Warning Receivers for the Airborne
Early Warning System (AEW & C) to Defence Electronics Research Laboratory
(DLRL)104. This has been fitted on the Embraer early warning radar developed
by Centre For Air Borne System (CABS)
103
https://saiindia.gov.in/uploads/download_audit_report/2015/Union_Compliance_Defence_Air_Force_Report
_38_2015_annexures.pdf
104
https://www.newindianexpress.com/cities/bengaluru/2012/may/24/drdos-production-version-of-iff-
system-ready-371040.html
 The company is also likely to deliver Next Gen completely wide open for LCA Mk
IA105 and Sukhoi 30 platforms subject to flight testing. After flight testing, these
can be fitted on the 83 LCA MK IA on order as well as the Sukhoi 30 upgrades (~
270 numbers), attack helicopters, etc. The flight tests are planned in the next 2
to3 months on the LCA, and similar tests are planned on Sukhoi 30 later.
 Various departments of the armed forces, including the DRDO utilise ATE for
validation of all the electronics on various platforms, including airborne electronic
systems such as Mission Computers, Displays, Launcher, Complete Missiles,
Laser Guided Bomb and Infrared Guided Missiles. Data Patterns is also likely to
benefit from the testing requirements of defence equipment in addition to the
space industry testing portfolio.
Due the strong positioning in the various projects and niche technology segments, it
is highly likely that:
 Products like RWR, airborne ELINT upgrades and airborne surveillance radars
could provide an annuity business based on the number of upgrades planned
 EW products/ receivers designed by Data Patterns can provide large project
orders and also pave the way for Data Patterns to participate directly and
independently in MoD tenders
 Position Data Patterns both as an independent OEM, and also a strategic partner
to companies like Tata, L&T, etc.
 Data Patterns is also well positioned to capture the growth in global markets once
the products have been inducted in Indian platforms
105
https://timesofindia.indiatimes.com/india/finally-orders-for-83-lca-mk-1a-
signed/articleshow/80674414.cms

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Defense and Space Industry

Figure 1 - World GDP Growth ....................................................................................................... 6

Table 1 - World GDP Growth ......................................................................................................... 6

2017 3.8 2.5 4.8

2018 3.6 2.3 4.5

2019 2.8 1.6 3.6

2020 -3.3 -4.7 -2.2

2021 6. 5.1 6.7

2022 4.4 3.6 5

2023 3.5 1.8 4.7

2024 3.4 1.6 4.6

2025 3.3 1.5 4.5

2026 3.3 1.5 4.4

Table 1 - World GDP Growth

Figure 1 - World GDP Growth

Impact of COVID 19 on Defence and Space Industry

Worst of supply chain and program disruptions are behind us

The Global Context

The geopolitics of the world continues to be governed by a contracting sphere of

Figure 5 - The "New Silk Road” Initiative

Meanwhile, Russia has evolved from a silent to an overt aggressor, as exemplified

Figure 6 - Russia's growing impact on global affairs

The US withdrawal is likely to have negative ramifications on terrorism in

Figure 7 - Geopolitics in Central & South Asia

In Europe, the approach towards security is becoming more multilateral and

The Indian Geopolitical Context

India‟s most pressing problems continue to be terrorism from Pakistan and a

Unmanned systems proliferation, an increasing focus on C4ISR and electronic

Proliferation of Unmanned Solutions

Figure 10 - Unmanned Solution Adoption by Countries

Unmanned vehicles are becoming increasingly electronics dense and several

New Standards in C4ISR and Network Centric Warfare (NCW)

Effective C3, supported by a reliable network composed of distributed ISR assets is

Advances in Electronic Warfare (EW)

Figure 12 - New Russian EW Equipment

A US Department of Homeland Security (DHS) report34 states that using EMP

As most EW and Electronic Counter Measures (ECM) solutions need to be built

Economic pressures are driving many commercial and governmental operators

Figure 13 - Defence Programmes Requiring High COTS Use

New Frontiers – Space & Cyber

1. A shift in attack methodology from data theft to data manipulation

Global Defence Spending

Figure 14 - Global Defence Spending CY 2015-2020

Other notable facets of defence spending in 2020 are38:

The rise in global defence expenditure even in an economic downturn can be

Post-COVID-19 China is on an economic rebound and has displayed increasing

An additional factor to consider is that many operators sustain varying degrees of

Figure 15 - Global Defence Spending Forecast: 2021-2026

Indian Defence Budget Brief and Forecast

Figure 16 - Defence Budget Growth FY 2017-2022

Code Head Description Analysis

Revenue Defence Services Revenue  The revenue component

Capital The Capital Outlay on Defence  The allocated capital

personnel in defence services. B / 3% in FY 22 budget

Defence Defence Pensions is allotted for  This allocation is not

Table 2 - Defence Budget Components Description

Salient features of the forecast are as below:

INDIA DEFENCE MODERNISATION PROGRAMMES