When ideaForge listed on the NSE in June 2023, it raised ₹567 crore at over 50x subscription and became the first Indian drone company to go public. The company had disclosed a dominant share of India’s domestic commercial drone market ahead of listing. Until very recently, that sentence would have been implausible — not because Indian engineers couldn’t build drones, but because there was no capital pathway from prototype to scale. That pathway now exists.
The Funding Architecture
The structural engine of India’s defence tech ecosystem is the iDEX (Innovations for Defence Excellence) programme, run by the Ministry of Defence. iDEX provides non-dilutive grants of up to ₹10 crore for standard projects, rising to ₹25 crore under the ADITI (Acing Development of Innovative Technologies with iDEX) stream for more complex military applications. These are direct MoD grants — founders don’t give up equity, and the technology validation that comes with winning an iDEX award substantially de-risks follow-on private fundraising.
India now has more than 195 defence-focused startups, with 83 having received institutional funding and 29 reaching Series A or beyond. Private capital is moving in. The Aavishkaar Group and Jamwant Ventures launched a ₹500 crore ($60M) fund in 2025 to invest in defence and deep tech startups, targeting 15-25 companies at seed and Series A stages.
The government procurement signal reinforces the capital signal: India’s Ministry of Defence has set a target of directing 25% of its defence research and development budget to private sector companies, with stated preference for startups over legacy contractors.
The Technology Focus
The highest-demand segments, as indicated by government procurement activity and iDEX challenge areas, are unmanned aerial vehicles and counter-drone systems, AI-powered surveillance and border security, electronic warfare, and soldier modernisation platforms. The counter-drone opportunity is particularly interesting from a market structure perspective: India faces documented drone incursion risks at its borders, which creates domestic procurement demand for the same technology that Indian startups are building for potential export.
Garuda Aerospace, a Chennai-based drone manufacturer, raised $22 million in a round led by SphitiCap and has signalled an IPO trajectory. As Global Venturing noted in early 2026, Indian defence startups are increasingly “IPO-ready” — a description that would have required a footnote three years ago.
The Screening Pattern
Defence tech is unusual as a startup investment category because the primary customer — government — has procurement processes that are slow, non-linear, and sometimes politically influenced. A startup that wins an iDEX grant has demonstrated technical credibility but may wait 18-36 months for that to translate into a recurring revenue contract.
The pattern that holds in our assessments of this sector: startups with a dual-use thesis — hardware that serves both military procurement and civil/commercial markets (agriculture drones for precision spraying, industrial inspection, disaster response) — have materially lower revenue concentration risk than pure-military plays. The iDEX grant funds the company through early development. The civil market provides recurring revenue during the procurement conversion gap. The military contract, when it arrives, represents upside rather than survival.
The Charaka View
India’s defence tech ecosystem is not a theme piece. The government tailwinds are structural and multi-year, reflecting a deliberate shift in defence procurement philosophy that predates the current government and has accumulated institutional momentum across parliamentary cycles.
The questions Manthan’s Analytical Council surfaces when assessing companies in this sector: Does the company have a dual-use thesis that generates civil revenue while military contracts mature? Is the technology defensible enough that a well-funded PSU or large contractor cannot simply replicate it at lower cost? And has the founding team demonstrated the institutional patience required to navigate a procurement process that operates on a different timescale from venture capital?
The companies that answer yes to all three are rare. They’re also the ones most likely to reach the IPO queue that ideaForge opened.
This analysis draws on Business Standard’s coverage of India’s defence startup ecosystem, Silicon India’s Garuda Aerospace funding report, Startup Flora’s iDEX programme guide, Global Venturing’s India defence ecosystem analysis, and Economic Times’ ideaForge IPO coverage. Human editorial oversight applied.
This analysis is informational and does not constitute investment advice, a research report, or a recommendation to buy, sell, or hold any security.
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