Defence stock falls over 3% after speculation of delay in GE engine deal


A leading state-owned aerospace and defense manufacturer, renowned for producing military aircraft and helicopters in India, faces market turbulence. Investors reacted sharply to unconfirmed reports suggesting potential delays in a crucial engine supply agreement with General Electric for their flagship Light Combat Aircraft program, raising concerns about the timeline of this strategic partnership.

Share Price Movement 

The share price of Hindustan Aeronautics Limited went down 3.18 percent to  Rs. 4,054 per share on Tuesday, a decline from its previous close of Rs. 4,187.5 per share. The market capitalisation now stands at approximately Rs. 2,71,134 crore as of January 21, 2025.

Recent Update 

Unconfirmed reports suggest a roadblock in HAL’s deal with General Electric (GE) for the F-414 engine, which is crucial for India’s Light Combat Aircraft (LCA) Tejas. HAL aims to deliver 16 LCA Mk1A jets to the Indian Air Force in 2025, with 83 jets expected by 2029, but project delays have already pushed back the first delivery from March 2024.

Earlier, Defence Minister Rajnath Singh’s visit to the US in August aimed to strengthen defense ties, partly due to delays in GE’s F-404 engine supply, which had been caused by supply chain issues. These delays have raised concerns about the timely induction of Tejas Mk1A, with multiple revisions to the aircraft’s induction timeline.

Financial Highlights

In FY2024, the company reported revenue of Rs. 30,381 crore, a growth of 12.8% from Rs. 26,928 crore in FY2023. Profits rose to Rs. 7,595 crore, marking a significant increase of 30.7% from Rs. 5,811 crore in the previous year.

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Competitors 

HAL’s major competitors in India include Bharat Electronics Limited (BEL) from the public sector and private players like Larsen & Toubro (L&T), Tata Advanced Systems Limited (TASL), and Mahindra Aerospace.

Hindustan Aeronautics is currently trading at a P/E of 33.04, which is less than the industry P/E of 100.8.

Market Outlook 

The Aerospace & Defence (A&D) industry is recovering well, with growth expected in both the civil and defense segments. Global defense spending is rising due to geopolitical tensions, while civil aviation is buoyed by the return of passenger traffic to pre-COVID levels.

The industry is projected to grow from $884 billion in 2023 to $1,230 billion in the next five years. In India, defense spending has increased, with a significant budget allocation for modernisation and capital expenditure, supporting growth in the A&D sector.

Written By Fazal Ul Vahab C H

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