The way DRDO functions is more like DARPA rather than like a LM, Boeing or Tata. Private entities will burn their hands only when a RoI - Financial returns is possible. Even the behemoth MICs like LM, Boeing with deep pockets do the job once the funds are released from DoD.
In the current Indian financial and market cap context for a MIC, it is not possible to run a 'private DRDO'. At best a highly motivated Bharat Forge/ Tata is possible. And we have companies like VEM, Astra MW, Walchandnagar, LandT also working in the limited space. That too they prefer the production like works. The majority of R&D, which is less glamorous and more money burning - comes from DRDO, ADA etc.. The R&D effort and money required for some of niche areas like Missiles, Propulsion, Aerosstructures and Materials, Electronics will simply break the back of small-medium players. The giant ones like Tata/L&T will not commit to risky-ventures unless backed by DRDO(R&D) and MoD(money). Like the Arihant SSBN project and Tejas ecosystem