Hindustan Aeronautics Limited (HAL) made a warm entry in the stock market today. Hal listed stock to 8-10% below issued price at Rs 1,240 down to 5.19 percent. Hindustan Aeronautics Ltd. shares started trading with symbol ‘HAL’ on stock exchanges NSE and BSE in the stock market on Wednesday. The last trading session of the financial year 2017-18 was on Wednesday.
In the initial public offer, the Government-owned Hindustan Aeronautics Ltd. has raised to Rs. 4,113 crores which are $633.35 million.
Market Debut made last week
Hindustan Aeronautics Ltd. (HAL) last week in the stock market debut failed to draw investors as it was issued for 99 percent. Another weak market debut was made last week by a defense firm Bharat Dynamics. It listed the document at Rs 370 on the NSE providing 13.55 percent discount on the issue price of Rs 428.
The HAL IPO was opened on March 16 and was closed on March 20. At about 10:27 am on Wednesday, the Hindustan Aeronautics shares traded at Rs. 1,176.25 on the BSE. Its index Sensex was down to 200 points at 32,973.
The IPO provided an offer on sale of rupees 4,198 crores which is up to 3.41 crores shares by the government of India (GOI). It included employee reservation of 6.69 lakh shares. For the retail investors and employees, they provided a discount of Rs25 per share. Therefore net offer consisted of 3.34crores shares. The object of GOI behind the offer was to carry out disinvestment plan in the market.
Hindustan Aeronautics Ltd. (HAL)
Hindustan Aeronautics Ltd. (HAL) is a state-owned company conferred with Navratna status in June 2007. According to the MoD Annual Report 2016-17, it is the largest defense PSU in terms production value. Its design, repair, develop, manufacture, overhaul, upgrade and service multiple ranges of products. Its products include multiple fields which are aircraft, helicopters, avionics, accessories, aero-engines, and aerospace structures.
The company owns 20 production divisions and 11 research and design centers in the country. The company is based on native research transferring technology and license agreements for manufacturing of its products. In order to grow business operations, it entered into 13 commercial joint ventures. The order book of the company is very strong. The value of order book until December 31, 2017, was 68461 million rupees. The company has maintained its balance sheet properly.
Change in defense allocation
India has the third largest military in the world and amongst all, it is the sixth largest country to spend on defense. Therefore defense allocations has raised by 7.81 percent to Rs 2.95 lakh crores from FY18’s which was Rs 2.74 lakh crores.
Sudip Bandyopadhyay who is the Group Chairman of Inditrade Capital also shared his views on defense allocation. He said that defense is a very interesting space and investors are getting carried away in defense allocation. According to him, many companies want to take their orders and rush to buy shares of these companies. Defense allocation is a project which takes much time in providing revenue and profit. There is no shortcut for these things. Therefore, companies have to be careful in defense.
Despite of the weak listing of HAL, it has a strong order book of Rs68, 461crores from December 31, 2017. Therefore it provides a revenue visibility for 4 years.
It also has few pipelines: 83 LCA Mk1A aircraft costing Rs60, 000crores and 15 LCH series production helicopters costing Rs4, 500crores. A strong growth in the services segment is also expected. It has 33% of FY17 gross revenues on major fleets of the Indian defense forces. The stock value at an upper price is P/E of 16xFY17. The stock of these productions might decline in future.