India’s defence technology sector marked 2025 as a landmark year, recording its highest-ever annual capital inflow of $247 million (about Rs 2,270 crore), according to a report by data intelligence platform Tracxn.
With this surge, the sector’s cumulative funding milestone has reached $711 million (about Rs 6,535 crore).
The report highlighted a significant shift in the ecosystem from exploratory venture deployments to “infrastructure-style conviction”, characterised by larger cheque sizes and a focus on execution-driven capability.
“India’s defence tech sector has attracted $711 million in all-time equity funding across 232 rounds. Annual funding has risen from $5 million in 2016 to a peak of $247 million in 2025 YTD. Funding increased from $37 million in 2021 to $75 million in 2022, followed by $139 million in 2023, and $125 million across 42 rounds in 2024.
“Despite a lower number of rounds in 2025 YTD (30 rounds), total funding nearly doubled year-over-year, largely driven by Raphe mPhibr’s $100 million Series B round. The number of annual funding rounds increased from 5 in 2016 to 42 in 2024, before moderating in 2025 YTD,” Tracxn said.
The data indicated intensifying capital concentration, with top-five companies absorbing about 53% of all funding.
This reflects investor pre-selection of future defence platform anchors rather than broad-based portfolio construction, the report noted.
Non-combat systems emerged as the preferred choice for investors, accounting for 78% of the total capital and 74% of startups in the ecosystem.
Combat weapon systems accounted for 15% of startups and $106 million in total funding, while defence support and training solutions made up the remainder of the value chain.
Geographically, Bengaluru led the sector, securing $216 million across 61 rounds. It was followed by Noida ($168 million across 19 rounds) and Chennai ($88 million across 26 rounds).
Together, these three cities account for over 66% of the total funding in the Indian defence tech ecosystem.
The report identified 116 venture capital firms participating in the sector. Venture catalysts emerged as the most active investor with six rounds, followed by HDA Tech Growth, Inflection Point Ventures, and Accel, each with five rounds.
While exit activity remained sparse, the report described it as “structurally meaningful”.
Since 2010, the sector has seen five IPOs and three acquisitions.
The report said liquidity in this space is governed by “sovereign trust and procurement embeddedness”, establishing defence tech as a long-horizon asset class.
“Defence technology in India is no longer defined by individual platforms, but by integrated systems spanning AI, autonomy, ISR, secure communications, and manufacturing depth. Policy reforms, rising defence budgets, and geopolitical imperatives are positioning defence technology as national infrastructure, linking military readiness, industrial capacity, and long-term economic value,” Tracxn noted.
