Spain has become a test of Europe’s ability to boost its hard power as Nato’s most reluctant military spender seeks to catapult Indra, a company once ambivalent about defence, into the sector’s top tier.
The Spanish government, which owns 28 per cent of the group, is refusing to spend as much as its peers on defence but is backing Indra’s transformation from an IT-led business known for radars to an aspiring member of the military big league.
“Right now we’re awash with work, with a tonne of possibilities,” Ángel Escribano, Indra chair since January, recently told foreign reporters, adding that “at least in Spain, in the 30 years I’ve worked in the sector, there’s never been an opportunity like this”.
Turning Indra into a company that can rival the likes of the UK’s BAE, Germany’s Rheinmetall and Thales of France will not be easy.
Its military efforts were stunted for years by the pacifism of a country where defence officials say they have been treated as “ugly ducklings”. Prime Minister Pedro Sánchez last week became the spoiler at a Nato summit as the only leader to spurn the alliance’s new defence spending goal of 5 per cent of GDP.
But a new military spending super cycle in Europe is unstoppable, driven by US demands that the continent take responsibility for itself.
Spain, which was at the bottom of the Nato spending league in 2024, announced in April that just to meet the alliance’s previous 2 per cent target it would spend €10bn more on defence this year. That is a potential bonanza for Indra, which is waiting for Spanish funds to be allocated.
In April, the group was given a role in 12 European Defence Fund research and development projects and made the leader of one involving radars. Its executives were in Ukraine last month pitching their wares.
Indra’s shares have rallied with the rest of the defence sector since Russia’s full-scale invasion of its neighbour, almost quadrupling its market value to more than €6bn since February 2022.
However, to take a larger slice of surging public spending it is looking for bold M&A deals to help it pull off a breakneck strategic shift.
For years Indra has been synonymous with its civilian air traffic control technology, while its quiet presence in defence was focused on software-powered mission systems that co-ordinate combat operations. As the Ukraine conflict melds digitisation with the return of trench warfare, Escribano has decided he wants to do hardware too, starting with ground assault vehicles.
“It’s a gap we can fill, and it’s a natural gap because we are already building a lot of the systems that go into the vehicle,” Escribano said. It was a “weakness”, he added, for Indra to supply products such as communication kits, sensors for missiles, and drone “kill” technology to other companies that complete production.
“We’ve never built the body of the vehicle, the metal part,” he said. “Now we’re working hard on being able to deliver the full product.”
Indra in June announced it had lifted its ownership of Tess Defence to 51 per cent, giving it control of the group, which is making 348 Dragón VCR 8-wheel combat vehicles for Spain’s armed forces under a supply and maintenance contract worth €2bn.
It had clashed with the only Tess shareholder that is not Spanish-owned — Santa Bárbara Sistemas, which belongs to US defence group General Dynamics. Escribano said in March that GD had “destroyed almost all the industrial fabric” of Santa Bárbara and signalled that Indra was eager to buy the business. But GD rebuffed him.
José Vicente de los Mozos, Indra chief executive, said the group remained determined to make acquisitions in vehicles. Asked if Santa Bárbara was still a target, he said “there are other companies that can be more interesting”.
Indra is among companies sizing up Italy’s biggest manufacturer of military vehicles, a division of van and truckmaker Iveco that has been put up for sale by owner Exor Group, according to one person familiar with the matter.
The manufacturing shift reflects Escribano’s own origins — he and his brother are the founders of Escribano Mechanical & Engineering, which made its name producing gun turrets for tanks and selling them in the Middle East.
EM&E is Indra’s second-biggest shareholder, with a 14 per cent stake. When the prime minister tapped previous Indra chair Marc Murtra to revive telecoms group Telefónica, the government backed Escribano to take his place.
While Murtra was a champion of the mission systems strategy, Escribano, in his first appearance before Spanish lawmakers, said he “would like to focus very much on regaining the manufacturing capabilities that Spain should never have lost”.
But Alberto Terol, a former Indra non-executive director, expressed doubts about the company trying to do everything. “Indra does not have a manufacturing tradition. It has an engineering and software tradition. Software appeals to its strengths, not its weaknesses.”
Escribano has also adopted more ambitious financial targets. When Indra last year reported revenues of €4.8bn, it set a goal of hitting €10bn by 2030 — a target Escribano now wants to reach by 2028.
Juan Cánovas, defence analyst at Alantra Equities, said: “To get to €10bn they need to buy something big, or do various small acquisitions.”
The chief executive said in June that Indra was evaluating “more than 20” potential European acquisition targets.
There is one controversial possibility: buying EM&E, which had sales of €300mn last year and boasts three factories making weapons systems, an area where Indra wants a presence. Any attempt would be a conflict-of-interest minefield for the Indra chair, who owns 50 per cent of EM&E.
Escribano’s goals extend to boosting Indra’s operations in every domain of warfare.
At sea, it provides radars and submarine sonars for Navantia, Spain’s state-owned shipbuilder. In space, Indra struck a €725mn deal in February to buy 90 per cent of Hispasat, a Spanish satellite operator. In the air, Indra is Spain’s lead participant in Europe’s flagship fighter jet project, the Future Combat Air System, a sometimes prickly partnership with Airbus, which represents Germany, and France’s Dassault Aviation. It also owns 9.5 per cent of ITP Aero, an aircraft component maker.
Stock investors still have reservations about Indra. Beatriz Rodríguez, analyst at Bestinver Securities, noted that the company traded at a “massive discount” to some peers. Indra is valued at about 18 times its forecast 2025 earnings, against roughly 25 for BAE, 49 for Sweden’s Saab and nearly 60 for Rheinmetall.
One reason is that the Spanish government’s growing influence over the company “has led to doubts over the rationale — both financial and strategic — behind certain decisions”, Rodríguez said.
Another is that defence is not the biggest part of its business, accounting for 21 per cent of sales last year, against 10 per cent for air traffic control and 62 per cent for its Minsait IT business.
The IT unit competes with the likes of Infosys and Capgemini to sell tech solutions to banks, healthcare and social security systems. One former executive said Minsait and defence were like “oil and water”. It was not until 2024 that Indra declared defence would become its priority, downgrading IT and trying to offload Minsait.
“When they said ‘IT is non-core’, the market liked the idea of selling the part of that business that has nothing to do with defence,” said Cánovas. “The market likes pure plays.”
But Indra could not seal a deal. Now Escribano says he only wants to sell Minsait’s payments business and will hold on to the rest. “The more time goes by, the more I’m falling in love with it,” he said.
Minsait is valuable, the company says, as a source of “dual use” technologies — AI, cyber security and cloud computing tools that were developed for civilian purposes but could have military applications.
In the new era of “total war”, Indra’s bet is that it can seize opportunities both for its old and new lines of business.
“I think we wouldn’t forgive ourselves,” Escribano said, “if we weren’t able to transform this company into what it’s meant to be.”
