Apollo Micro Systems: From Missile Parts to Full-Fledged Weapon Systems

Modern warfare has made one thing very clear: missiles and precision weapons are no longer just one part of a defence system they are becoming central to it.

And as countries ramp up defence spending, India is also going through a structural shift.

Global defence spending stood at around $2.47 trillion in 2024 and is expected to move towards $3 trillion by 2027. Europe alone spends around $457 billion, the US close to $1 trillion, and China around $314 billion.

India, meanwhile, spends only around 1.9% of GDP on defence.

The interesting part is not just how much India spends.

It is where that spending is going.

India is slowly moving away from defence imports:

For decades, India has relied heavily on imports for critical defence equipment.

Between 2019 and 2023, India imported around $60 billion worth of arms, while roughly 65–70% of capital procurement was still dependent on imports.

The problem with this model goes beyond the initial purchase price. Imported systems often mean:

• Higher maintenance costs

• Dependence on foreign OEMs

• Limited technology transfer

• Lack of control over critical IP

• And, importantly, vulnerability to geopolitical and supplier-related risks

That is why the policy direction has started changing.

At the same time, the government is pushing the IDDM Indigenous Design, Development and Manufacturing route.

The result?

India’s import share of defence procurement has already fallen from around 41% to 27% in FY24, with an eventual target of just 7–10% by FY30.

This is where companies supplying indigenous defence systems can potentially benefit.

And one company that is trying to move up this value chain is Apollo Micro Systems.

From missile components to complete weapon systems:

Apollo Micro Systems did not start as a weapons-platform company.

It started largely as a white-label manufacturer of missile components, with BDL being one of its key customers.

But the strategy has been changing.

The company is now trying to move from supplying components to developing complete weapon systems and platforms.

Its portfolio now includes areas such as torpedoes, Naval mines, Loitering munitions, Kamikaze boats, Counter-UAS systems.

This shift is important. Because moving up the value chain can mean higher content per system, greater IP ownership and potentially better economics.

The bigger question, however, is whether Apollo can actually execute this transition at scale.

Q1FY27 showed the momentum:

The latest quarter gives some indication of where the company is headed.

Revenue grew 88% YoY.

EBITDA, excluding other income, grew 31%, while PAT jumped 43%.

More importantly, the order book has reached around ₹1,704 crore.

Management has also maintained its 40–45% revenue growth guidance for FY27.

Exports are expected to start contributing once Unit 3 becomes operational.

And that makes Unit 3 one of the most important things to watch from here.

Unit 3 could change the scale of the business:

Apollo is building a large 3.5 lakh sq ft Unit 3, which represents roughly a 4–5x expansion in capacity.

The company plans to spend more than ₹250 crore on capex, with a new campus involves another investment of around ₹300 crore, with ramp-up expected during FY28–29.

A company does not normally undertake this kind of capacity expansion without some confidence in future demand.

That is the opportunity.

But it is also the risk.

The next phase of Apollo’s story will depend less on announcing new opportunities and more on converting them into production and revenue.

The optionality is getting interesting:

Beyond the current order book, Apollo has several potential growth drivers.

One of the bigger opportunities is the naval mine programme.

The overall opportunity is estimated at around ₹4,400–4,500 crore, with Apollo’s potential addressable share estimated at around ₹2,000 crore, subject to the RFP from BDL.

Then there are torpedoes.

India’s nuclear submarine programme and the expansion of the submarine fleet could create a long-term opportunity for domestic suppliers of underwater weapon systems.

Apollo is also looking at opportunities around Project Kusha, India’s planned long-range air-defence system.

There is also the Reddon consortium tie-up for loitering munitions, another segment that is seeing increasing importance globally.

So, the opportunity is not dependent on one single missile programme.

Apollo is effectively building exposure across multiple emerging defence categories.

The IDL acquisition adds another layer:

Another interesting part of the story is Apollo’s acquisition of IDL Explosives from the Hinduja Group.

The deal was around ₹100 crore for a business that had previously generated roughly ₹500 crore in revenue.

The reason for the relatively low valuation was a Coal India ban on IDL due to environmental issues. That ban has since been lifted.

But the strategic value of the acquisition is arguably more important than the purchase price.

IDL gives Apollo capabilities around explosives, warheads and fuses.

That allows the company to integrate further into the missile itself.

In simple terms, Apollo is trying to move from:

Component → Sub-system → Weapon system → Complete platform

That vertical integration could become a meaningful competitive advantage if executed well.

But there is one big red flag:

The growth story looks attractive.

The order book is growing.

Capacity is expanding.

The product portfolio is getting wider.

But there is one number investors should not ignore:

The working-capital cycle:

Apollo’s cash conversion cycle has been around 443 days.

That is extremely high.

A long working-capital cycle means the company can report strong revenue and profits while still having a significant amount of cash stuck in receivables and inventory.

And this has already had consequences.

The company has seen repeated equity dilution, while around 39% of promoter holding is pledged, linked to a preference-share subscription.

Management is targeting a reduction in the working-capital cycle to around 240 days and aims to eliminate the pledge by the end of FY27.

This is something investors need to track closely.

Because growth is only valuable if it eventually converts into cash.

What to watch from here?

There are essentially four things that will decide the next phase of the Apollo Micro Systems story.

1. Unit 3 execution

The company is making a major capacity addition. The key question is how quickly this capacity gets commissioned and utilised.

2. Order-book conversion

A ₹1,704 crore order book looks strong, but investors need to see how quickly it translates into revenue.

3. New weapon platforms

Torpedoes, naval mines, loitering munitions and counter-UAS systems can significantly increase the addressable market, but these are still opportunities that need to translate into actual orders.

4. Working capital

This could be the most important financial metric to track. Management wants to bring the cash conversion cycle from around 443 days to 240 days.

If that happens alongside 40–45% revenue growth, the quality of growth could improve significantly.

Our Takeaway:

Modern warfare is increasing the importance of precision weapons, drones, counter-drone systems, underwater weapons and autonomous platforms.

Apollo is trying to position itself right in the middle of this transition.

The numbers are already showing strong growth, and the company has maintained an ambitious 40–45% FY27 revenue growth target, along with a 26–28% margin target and plans to spend around 8% of revenue on R&D.

But this is still an execution story.

The opportunity is big. The optionality is even bigger. But Unit 3 execution, order conversion and working capital will decide whether Apollo can actually deliver on that opportunity.

For now, this is a defence company worth keeping on the radar as India’s missile and weapons ecosystem moves from import dependence towards indigenous manufacturing.