India’s defence sector is constantly evolving due to new technology, politics, and the country’s goals. The Prime Minister recently stated at the Aero India event that India aspires to be the world’s largest manufacturer of defence equipment. The government intends to earn $25 billion from defence and export $5 billion to other countries by 2024-25.

They are allocating 25% of the research funds to private enterprises and startups in India to develop new defence technology. The interim budget for fiscal year 2024-25 was announced by Finance Minister Nirmala Sitharaman on February 1. The Ministry of Defence (MoD) received ₹ 6,21,541 crore (US$74.8 billion) out of a total budget of ₹ 47,65,768 crore (approx. US$574 billion).

The MoD’s interim budget, which accounts for 13% of Central Government Expenditure (CGE), is a 4.7% increase over prior allocations and is the highest allocation among all ministries. India already sells defence products to roughly 75 nations, so there is plenty of space for expansion. Because of this, many defence businesses’ stock prices have skyrocketed.

Not many organisations can say they have clients such as the Defence Research Development Organisation (DRDO), the Indian Space Research Organisation (ISRO), Hindustan Aeronautics Limited (HAL), and the Vikram Sarabhai Space Centre. Astra Microwave Products Limited (AMPL) can.

Few can boast that exports account for 40% of their revenue. This company can. And few saw their revenue more than double last year. It did. What distinguishes this defensive technology provider? This company has given a return of 126.89 per cent for just over one year. When looking at the period of three years, the stock has surged a whopping 295 per cent.

With India aiming high in defence and numerous countries seeking defensive equipment, Astra Microwave equipment appears to have a promising future. So, what does this company do, and what are its plans for the future? Let’s go into the article.

Astra Microwave – Corporate Overview

Astra Microwave Products (AMPL) was founded in 1991 by a group of scientists with experience in RF/Microwave/Digital electronics and project management with high technology content who recognised the need for a stable and technically powerful private company capable of designing, developing, and manufacturing high-end RF and Microwave subsystems and systems for strategic applications.

Over the past 30 years, the company has developed from a tiny production plant called Unit I to a ₹ 800 crore turnover entity by continual investment in infrastructure, captive test facilities, and other resources. 

The corporation has three production units, two R&D units, and one exclusive space certified facility. AMPL now has a wide range of assembly and test facilities, including three automatic assembly lines for PCBA assembly, five class 10,000 clean rooms, functional test infrastructure ranging from 30MHz to 40GHz, in-house environment test facilities, including an EMI/EMC facility, and a near field antenna test and measurement range, a first for any Indian private industry.

Astra Microwave – Business Segments

AMPL operates in the following business verticals: Defence, Space, Metrology/Civil Telecom/Others

Defence

The company is involved in designing, developing and producing crucial sub-systems for its customers for building various aerial, naval and ground-based systems. The company produces equipment for Radar Electronics, Equipment Warfare, and Strategic Electronics & Telemetry. 

This segment remains the most revenue-generating vertical, accounting for 55 percent of the total revenue in FY2023.

Space

Since 2004, AMPL has collaborated extensively with the Indian Space Research Organisation (ISRO) to design, develop, and manufacture space-grade subsystems and components for several Indian satellite programmes, and has been associated with every significant satellite programme in India since 2007. 

The company has participated in both Flight Model and Ground Based Electronics for ISRO. In fiscal year 2023, this segment accounted for 1% of total sales.

Metrology/Civil Telecom/Others

The company creates technology for measuring meteorological and environmental changes around us. In fiscal year 2023, this segment accounted for 4% of total sales.

Astra Microwave – Financials

In the fiscal year 2023, Astra Microwave Products saw an increase in revenue, surging by 8.6% to reach ₹815.52 crores as opposed to ₹750.46 crore in FY2022. Analyzing a span of four years, encompassing FY2020 to FY2023, the company displayed a robust Compound Annual Growth Rate (CAGR) of 20.4% in revenue.

Simultaneously, there was a noteworthy upturn in net profit, experiencing an 84.4% increase from ₹37.87 crore in FY2022 to ₹69.83 crore in FY2023. Over the cumulative four-year period from FY2020 to FY2023, the net profit showcased a 16.6% CAGR.

In FY23, Astra Microwave Products maintained favourable financial metrics with a Return on Equity (ROE) of 11.37% and a Return on Capital Employed (ROCE) of 15.84%.

Astra Microwave – Future Plans

Healthy Order Book

As of December 2023, the company’s order book was valued at ₹ 1813 crore, which is two times its FY23 sales. With significant tailwinds in the defence and space sectors in terms of indigenizing key systems/subsystems, AMPL has a massive order inflow opportunity in both domestic and export markets.

AMPL is expected to get orders of approximately ₹8000 crore by 2028, particularly in defence and space electronics. Increased domestic purchase of raw materials and subcomponents would reduce the risk of supply chain difficulties, improving overall execution.

Strong R&D and manufacturing capabilities

Astra Microwave is well-positioned to capture a larger share of the expanding Indian defence market, thanks to its extensive domain experience and emphasis on R&D. The company has designed, developed, and manufactured important subsystems/systems for a variety of airborne, naval, and ground-based platforms including radar, missile electronics, electronic warfare (EW), satellites, MMIC, and communication.

With strong domain expertise in microwave and radio frequency applications, AMPL has moved up the value chain from manufacturing sub-systems/components to developing and producing a wide range of high-end, high-value critical microwave and radio frequency application-based equipments like Gallium Nitride (GaN) Transmit/Receive Modules (TRMs), NavIC (Navigation with Indian Constellation) chips and other key radars and EW systems, etc.

Conclusion

With a robust order book, strong R&D capabilities, and the Indian government’s push towards indigenization, Astra Microwave Products appears well-positioned to capitalize on the growing opportunities in the defence and space sectors. The company’s expertise in developing critical subsystems and components for various platforms could help it secure substantial orders in the coming years.

However, execution risks and supply chain challenges remain potential roadblocks. What are your thoughts on Astra Microwave Products’ future prospects? Share your thoughts in the comments below!

Written by Nalin Suriya 

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