Profits up, gaps remain: OFB overhaul yields mixed results three years on

Since the corporatisation of the Ordnance Factory Board, profits are up, the order book is looking healthy in parts, but export gaps persist

Nearly three and a half years after the Ordnance Factory Board (OFB) was corporatised, merging 41 production units into seven new defence public sector undertakings (DPSUs), a report presented by the Parliamentary Standing Committee on Defence last week highlighted encouraging profitability. However, a closer look at the data points to uneven future prospects, variations in projected order books, and differences in export performance.  

While six of the seven DPSUs reported profits in 2023-24 (FY24), one remained in the red, and only two managed to establish any discernible export presence. Also, at least one of the DPSUs showed limited prospects for future orders. 

That said, corporatisation appears to be making headway in its goal of improving efficiencyand financial viability. 

Of the six DPSUs that turned a profit, Avadi (Chennai)-headquartered Armoured Vehicles Nigam Ltd, or AVNL, led with a profit of ₹605.06 crore. Kanpur-based Advanced Weapons and Equipment India Ltd, or AWEIL, which focuses on small- and 

large-calibre weapons, meanwhile, recovered from a loss of ₹12.79 crore in FY23 to register a profit of ₹20.24 crore in FY24. 

Troop Comforts Ltd (TCL), also headquartered in Kanpur, which manufactures uniforms and extreme-climate clothing, was the only DPSU to post a loss, reporting a deficit of ₹303 crore. The committee attributed this to a weak order book of just ₹340 crore, but noted that the army headquarters had placed fresh orders worth over ₹1,200 crore in the last quarter of FY24. This suggests TCL’s position may improve in FY25. 

Before the Indian ordnance factories were corporatised and the OFB dissolved on October 1, 2021, all the 41 production units that went on to form the seven DPSUs had cumulatively incurred losses over the preceding three years.  

This changed almost immediately.  

In the first six months of operations — from October 1, 2021, to March 31, 2022 — six of the seven DPSUs reported provisional profits. The only exception was Nagpur-headquartered Yantra India Ltd (YIL). 

Since then, barring TCL, the others have either recorded profits or ended FY24 in the black, though not all have seen consistent profit growth. The highest profit compound annual growth rate over this period was posted by Pune-based Munitions India Ltd (MIL), followed by AVNL and AWEIL. 

The order book   MIL, which produces ammunition, explosives, rockets, and bombs, also holds the highest projected order book for FY25 at ₹23,120 crore. Over the next five years (FY26 to FY30), MIL is expected to maintain its lead with ₹67,250 crore in potential orders.  

Dehradun-headquartered India Optel Ltd (IOL) — which specialises in electro-optical devices, night vision gadgets, and communication systems — and AVNL follow in second and third place, respectively. AVNL is projected to see the sharpest growth, with its order book likely increasing over sevenfold, from ₹5,544 crore in FY25 to ₹41,735 crore in the following five years. 

Together, MIL, IOL, and AVNL account for nearly 80 per cent of the total projected order book — close to ₹1.99 trillion — for FY26 to FY30. 

TCL, despite having the second-lowest order book in FY25 at ₹1,155 crore, is projected to increase its future orders nearly 5.7 times to ₹6,575 crore. Meanwhile, YIL, which is engaged in metal and shell forging for ammunition and armament components, is expected to grow its order book by over six times, and AWEIL by more than four times, reflecting a strong forward momentum. 

Kanpur-based Gliders India Ltd (GIL), which manufactures parachutes and aerial delivery systems, holds the smallest projected order book, both currently and prospectively. 

This refers to the value of orders that the new DPSUs will be competing for during FY25 and the following five financial years. 

‘Substantial variation’

  The committee observed substantial variation in the DPSUs’ current order book position, but acknowledged that it understood this was “due to the nature of products they produce, provide or supply”. 

When it came to the actual order book position, as of December 31, 2024, AVNL led with ₹33,956 crore, while GIL was at the bottom with just ₹293 crore. The cumulative actual order book of all seven DPSUs stood at ₹78,984 crore, with AVNL and MIL together accounting for nearly 73 per cent of it. 

The government has taken several steps to handhold the DPSUs.  

For instance, outstanding indents with the erstwhile OFB were grandfathered and converted into deemed contracts worth about ₹70,776 crore. Also, ₹7,765 crore was credited as a mobilisation advance before business operations began in FY22.  

The Ministry of Defence (MoD) has informed the committee that with “more functional and financial autonomy, the new DPSUs are exploring newer markets, both at national and international levels” and that it is providing “financial and non-financial support” to help make them productive and profitable.  

 

 

A skewed export basket 

When it comes to defence-related exports, things have improved, but not every DPSU has found an international market yet. 

The committee noted that exports from the DPSUs collectively increased from a meagre ₹82.18 crore in FY23 to ₹1,976.51 crore in FY24 — a remarkable 2,300 per cent jump. However, MIL alone accounted for 86 per cent of this total, while YIL contributed 11 per cent. AVNL reported no exports at all in FY24.

  The committee recommended that DPSUs identify focus areas for export growth. The MoD, meanwhile, said that the DPSUs were exploring international opportunities, “proactively pursuing various leads received from the government and other channels”.  

However, the growing capabilities of the private sector could, in a few years from now, pose a challenge to even those DPSUs that are currently showing strong momentum. 

That might not be a bad thing, though. “Privatisation may be the best long-term option,” said Laxman Kumar Behera, associate professor at the Special Centre for National Security Studies, Jawaharlal Nehru University, New Delhi. “While the government may continue to play a role in ammunition manufacturing, private sector competitors — such as the Adani Group, Kalyani Group, and Larsen & Toubro — are likely to outperform DPSUs in small arms, artillery, and armoured vehicles.”   

However, since privatisation requires political will — “which may be difficult to muster” — the next best option is consolidation: Reducing the number of DPSUs from seven to two or three, he added. “Competition with the private sector must also be encouraged, which calls for greater autonomy for these DPSUs,” Behera said. 

Capex underutilised

  For now, DPSUs also need to focus on the funds at hand. 

The government allocated ₹8,745 crore in capital expenditure for DPSUs for FY22 to FY27. Of this, ₹5,757 crore —about 66 per cent of the allocation— was released up to FY25 for modernisation, and research and development. However, by December 31, 2024, only ₹3,261.78 crore — 57 per cent of the disbursed amount — had been utilised. 

The committee highlighted that modernisation and technology upgrades were a primary concern, and hoped the funds would be “prudently and productively” used.  

It recommended that the MoD continue to provide support to ensure these enterprises remain competitive in the global defence industry. 

The country’s expertise in defence manufacturing is, after all, critical for both its “atmanirbhar Bharat” (self-reliant India) and “Viksit Bharat” (developed India) ambitions.