HAL shares gain 13% after cabinet approves Tejas order

The share price of Hindustan Aeronautics Limited (HAL) surged over 13 percent on Thursday after the cabinet approved procurement of indigenously-developed light combat aircraft Tejas for the Indian Air Force (IAF).

"The Cabinet Committee on Security (CCS) chaired by PM Narendra Modi today approved the largest indigenous defense procurement deal worth about Rs 48000 crore to strengthen IAF's fleet of homegrown fighter jet LCA-Tejas," Defense Minister Rajnath Singh said yesterday.

After the announcement, the stock surged as much as 13.7 percent — its highest since August. At 12:40 pm, the stock was trading 96.25 points, or 10.45 percent higher at Rs 1017.15 per share. The stock is up for the second trading day.

Tejas is a four-and-half generation combat jet that will strengthen IAF's fleet of homegrown fighter jet LCA-Tejas. The IAF had issued a tender for this procurement worth Rs 48,000 crore some three years back.

Hindustan Aeronautics has already set up second-line manufacturing facilities at its Nasik and Bengaluru divisions. Around 500 Indian companies, including MSMEs in the design and manufacturing sectors, will work with HAL on this project.

Market experts believe that while it is a net positive development, its implementation will be a critical issue. PSUs often slack in execution which increases their working capital costs, markets would like to see how quickly this project is implemented, they said.

In May, Finance Minister Nirmala Sitharaman rolled out several reform measures for boosting the defense sector. Some of the reforms include increasing the FDI limit from 49 percent to 74 percent under the automatic route, making separate budgetary outlay to procure Indian-made military hardware, and generating a year-wise negative list of weapons that won't be imported.