Earlier this year, in March, Indian defence avionics company Samtel announced that it was diversifying into space technologies and drone manufacturing and had set aside a budget of Rs 200 crore to diversify its product line over the coming years.

The timing is no coincidence. As loitering munitions and drone swarms redefine conflicts from Eastern Europe to West Asia, global defence spending is undergoing a recalibration.

Puneet Kaura, CEO of Samtel Group, called the company’s new venture “a logical extension” and said that “in defence avionics and mission-critical electronics, aligned with where modern warfare is heading”.

Signalling a decisive scale-up into unmanned systems, Samtel is targeting a Rs 1000 cr revenue in long-range loitering munitions and logistics drones in the next three to five years, Kaura told The Core exclusively.

As drones become a part of high-frequency conflicts globally, Indian firms are leveraging this and scaling up drone manufacturing even as the government comes up with schemes to back this mission.

India’s Market Entry

Iran’s mass drone strike on Israel has exposed a harsh cost reality: attackers spend little while defenders burn million-dollar interceptors. Ukraine’s early use of manually guided “first-person-view” (FPV) attack drones has triggered a rush to build large FPV inventories.

“The build-out by the US, Europe and Asia requires inexpensive interceptors and advanced anti-ballistic/counter-hypersonic systems, a need underscored by Iran's use of drones and rockets across the Middle East,” Wayne Sanders, senior industry analyst at Bloomberg Intelligence, told The Core.

The cost exchange is stark: a $20k–$35k Shahed-136 can force a $3-4million interceptor shot, a 100:1–200:1 imbalance.

Sanders said a global expansion of air defence could generate $400–$500 billion for major OEMs, as it increases dramatically depending on the length of the war. The surge forces countries, including Israel and the US, to rethink stockpiles as Israel’s FPV demand alone climbs to 20,000–30,000 units annually. Into this recalibration enters India, emerging as a high-volume, low-cost FPV drone and loitering munitions supplier.

Gov Schemes Back Firms

India's manufacturing base is supported by a deep pool of MSME component suppliers and a rapidly scaling defence-startup ecosystem for FPV drones.

The country already produces airframes, motors, batteries, optics, autopilots and warheads domestically, giving it vertical control of the supply chain at costs far below Western manufacturers.

A cluster of government schemes has also prompted private-sector manufacturing at scale for drones and loitering munitions. The PLI Scheme for Drones saw several airframe and component makers such as IdeaForge, Dhaksha, Asteria, Aarav, ZMotion, Absolute Composites, Sagar Defence, and Paras Aerospace become beneficiaries.

The Make-II route, which requires companies to develop prototypes at their own expense in exchange for guaranteed orders, has drawn in major players like Adani Defence, Solar Industries, and Raphe Mphibr. Meanwhile, the government’s iDEX (Innovations for Defence Excellence) incubator has seeded the startup ecosystem, providing the initial backing for agile newcomers such as NewSpace Research, GalaxEye, and AeroArc.

These efforts were bolstered by emergency and fast-track procurement mandates, which generated immediate domestic demand for FPV drones and loitering munitions. Complementing this, a wave of strategic partnerships and joint ventures has embedded Indian firms into global supply chains. Together, these initiatives form the policy backbone enabling India’s transition into a high-volume, low-cost production hub for unmanned systems.

India now has 32 FPV drone manufacturers, roughly 18 loitering-munition developers, and 20 suppliers churning out mission-critical components like autopilots and carbon-fibre airframes.

A more concentrated cluster of seven firms, led by Solar Industries and Economic Explosives, supplies the specialised propulsion and warheads that drive kamikaze drone payloads. While these figures are not officially published, the scale of the sector is reflected in recent tender participation, industry disclosures, and the shifting activity of defence startups.

A Billion-Dollar Recalibration

Samtel is using its avionics business to move into flight systems, while Solar Industries and Economic Explosives corner the propulsion and warhead market. Adani Defence and Paras Aerospace are tackling long-range systems, leaving the high-speed FPV airframe and integration market to agile players like NewSpace and Raphe Mphibr.

Driving this surge is a deepening industrial alliance with Israel, fueled by an urgent need for high-volume, low-cost capacity. This partnership, already proven through the Barak-8 and Hermes-900 programmes, is entering a new phase of rapid technology transfer.

Israeli AI-autonomous specialist XTEND has formalised an $11-million partnership with Rayonix Tech, with a technology transfer expected within eight months. This will be supported by a 500-acre Hyderabad facility modelled after a major Texas plant. With software integration centred in Gurgaon, Rayonix Managing Director Amit Pande told The Core that international interest is already mounting from countries including Saudi Arabia.

The Adani-Elbit complex in Hyderabad remains a cornerstone of this corridor. As the first facility outside Israel to manufacture the Hermes-900 MALE UAV, the plant exports carbon-composite aerostructures back to Israel for final integration. “This joint venture facility for the manufacturing of Unmanned Aerial Vehicles is a testament to Elbit’s commitment to our nation and the ‘Make in India’ programme,” Gautam Adani, chairman of the Adani Group, said in a statement.

Further deepening this link, Lohia Group’s 2019 acquisition of Israel’s Light & Strong has embedded the firm into the global UAV supply chain. From its Kanpur facility, Lohia now exports critical composite structures for tactical and MALE-class drones to both Israeli and Western OEMs.

In Odisha, BonV Aero is breaking ground on a Rs 300-crore facility to produce DefendAir, an Israeli-designed kinetic net-launcher. The system offers a battle-tested counter-UAS solution that captures drones mid-air without disrupting radio signals. Satyabrata Satapathy, Co-Founder and CEO of BonV Aero, said, "From indigenous heavy-lift drone manufacturing to next-generation pilot training, the project is structured to draw local MSMEs and ancillary industries into its supply chain.”

This evolving corridor is transforming India from a junior partner into a high-tech manufacturing hub, creating a streamlined export pathway for the next generation of unmanned warfare.

Structural Bottlenecks

Despite the government push and several companies pivoting to drone manufacturing, several bottlenecks remain.

India still imports several components from China, the major global supplier, and the environment remains politically sensitive and commercially risky. This pushes manufacturers toward grey channels, mislabelling and sub‑spec components, creating fraud pathways that directly undermine defence‑grade FPV drone reliability.

Present bottlenecks still slow the shift from prototype to mass production. “The ecosystem faces structural hurdles-dependence on motors, Electronic Speed Controllers and gaps in miniaturised electronics,” Rajiv Chib, Founder and Partner at Insighteon Consulting, told The Core.

Fragmented MSME supply chains, slow civilian‑oriented certification, limited, high‑G and Electronic Warfare testing, and constraints around warhead, integration and skilled labour are being addressed, and India should be “export‑ready at scale by 2027,” Chib adds.

OEM partnerships from Israel, in particular for FPV drones, have shifted to fast, modular co‑production — foreign firms supply protected tech and software interfaces, while Indian partners build airframes, power systems, and non‑sensitive electronics. OEMs are also helping replace China‑origin parts with Taiwanese, Korean and European substitutes.