| 20 Feb 2026 15:13 | | Bharat Electronics Limited: Ratings reaffirmed | | | Rationale The ratings reaffirmation for Bharat Electronics Limited (BEL) reflects its large scale of operations, strategic position as a dominant supplier of electronic equipment to the Indian defence forces, and robust financial profile characterised by negligible debt levels, healthy operating margins and superior liquidity position. BEL, by virtue of being majority owned by the Government of India (GOI) and being a Navratna defence public sector undertaking (DPSU), witnesses a sizeable inflow of orders on a nomination basis. The ratings consider the strong order pipeline with an unexecuted order book worth Rs. 73,015 crore as on January 01, 2026, which translates into an order book to operating income (OI) ratio of around 3.2 times (based on FY2025 operating revenue), providing healthy revenue visibility in the medium term. ICRA expects BEL to register an annual revenue growth of 10%-15% over the near to medium term, while maintaining its robust coverage metrics and superior liquidity position in the interim. With the Government’s focus on increasing the share of private sector in the manufacturing and technological development in the defence sector, the competition from the private sector is likely to intensify in the medium to long term. However, BEL’s established track record and large manufacturing capacities with an adequate pool of trained manpower and focus on research and development (R&D) will be strong mitigating factors. BEL’s consistent investment towards R&D has helped to create a strong competitive position by enabling it to develop the latest generation products as well as services and gradually increasing the indigenisation of its product offerings, which has been a key driver to the company’s revenues and healthy profit margins. The rating strengths are partially tempered by BEL’s continued high dependence on the domestic defence sector, which contributes to the bulk of its revenues (FY2025: ~89%). BEL, however, is targeting to gradually increase its share of non-defence revenues over the medium term, though it continues to remain low at present as the share of revenues from civil and export businesses stood at around 11% in FY2025 (FY2024: ~19%). BEL’s operating profit margins remain susceptible to input cost fluctuations, as defence contracts are generally fixed price in nature. The ratings factor in BEL’s high gross operating cycle, led by high receivable days and long production cycle resulting in a high inventory holding period. ICRA takes note of the increase in its working capital intensity in FY2025, primarily on account of lower customer advances owing to lower order inflows (due to impact of the union elections in Q1 FY2025). Nevertheless, the company is able to manage its working capital through these sizeable customer advances and extended creditor days, though, the working capital requirements on an ongoing basis will remain a key monitorable. This, though, has translated to a moderate TOL/TNW of 1.0 times as on March 31, 2025 (FY2024: 1.4 times), but has been on an improving trend, supported by ploughing back of healthy profits, leading to strengthening of the net worth. The Stable outlook reflects ICRA’s expectation that BEL’s financial profile is likely to remain strong, supported by its strategic importance as the major supplier of defence electronics equipment to the Indian defence forces and the high sectoral entry barriers, which would limit competition. www.icra.in Sensitivity Label : Public Page |2 Key rating drivers and their description Credit strengths Defence Navratna PSU and a dominant supplier of electronic equipment to Indian defence forces – BEL is a DPSU, with the GOI holding a 51.14% equity stake as on December 31, 2025. The company is of strategic importance to the GOI as it is the dominant domestic supplier of defence electronics equipment to the Indian defence forces. Further, BEL’s status as the largest domestic electronics manufacturer leads to benefits associated with the economies of scale. In addition, the Government ownership leads to a sizeable inflow of orders on a nomination basis (around 80-90% of defence orders), providing a steady earnings stream for the company. Strong order book position provides healthy revenue visibility – The company’s unexecuted order book as on January 01, 2026, stood at Rs. 73,015 crore. This translates into an order book to OI ratio of around 3.2 times (based on FY2025 operating revenue), providing adequate medium-term revenue visibility. Additionally, the Government’s growing capital budget allocation and continued focus on increasing India’s defence product manufacturing capability are expected to support the order inflow for BEL in the medium to long term. Strong financial profile – BEL’s financial profile remains strong, characterised by sizeable scale of operations, healthy profitability, nil external borrowings and a superior liquidity profile. The company reported a consolidated OI of Rs. 23,769 crore in FY2025 (around 17% growth on a YoY basis) with an operating profit margin of 28.8% (FY2024: 24.9%). Aided by healthy order execution in the first nine months of FY2026, BEL reported a top line of Rs. 17,386 crore (around 19% growth on a YoY basis) with an operating profit margin of 29.1%. With expectation of a healthy fourth quarter performance, ICRA estimates BEL’s FY2026 full-year revenues to witness a healthy growth of around 10%-15% on a YoY basis. Its superior liquidity profile is supported by sizeable free cash and bank balance of over Rs. 8,000 crore as on September 30, 2025, along with unutilised fund-based working capital facilities of Rs. 500 crore. Continued focus on R&D by BEL and GOI’s intent to increase share of indigenous procurement provide competitive advantage – BEL is focused on R&D for increasing indigenisation and value addition in its products/systems. It has set up a three-layer R&D structure, namely Central Research Laboratories (CRL), Product Design and Innovation Centre (PD & IC) and Development & Engineering (D&Es) attached to strategic business units. Consistent investment towards R&D (6-7% of operating revenues) helped to create a strong competitive advantage compared to its other domestic peers. BEL’s focus on gradually increasing the indigenisation of its product offerings aided in sustaining healthy profit margins. Additionally, the GOI’s focus on increasing indigenous procurement under ‘Atmanirbhar Bharat’ initiative provides a unique opportunity for BEL to build its future revenue streams through development of domestic capabilities. Credit challenges High dependence on domestic defence sector for orders with limited export business – The Indian defence sector is the major customer of BEL, accounting for nearly 89% of the turnover in FY2025. The company’s revenue and order book position can be affec | | Powered by Capital Market - Live News |
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