HAL tracks Rajnath Singh's US visit, hopes for early GE engine supplies

HAL stock has rallied 139 percent in the last one year, more than doubling investors' capital. In comparison, Nifty delivered returns of around 27 percent during this period.

Shares of Hindustan Aeronautics (HAL) are steady on August 23 as USA and India signed a Securities of Supplies Agreement (SOSA) during Defence Minister Rajnath Singh's ongoing visit.

Rajnath Singh is currently in US to strengthen and widen defence cooperation, amid anticipation that issues around timely delivery of General Electric's F-404 engines - essential for HAL's Tejas Mark-1A - may be ironed out. The delays have reportedly been attributed to supply chain disruptions at GE Aerospace.

HAL had committed to delivering 16 LCA Mk1A jets to the Indian Air Force in 2025, with a total of 83 jets by 2029. Project-related delays have pushed back the first delivery - originally scheduled by March 2024 - to November, and also weighed on the stock price amid talk of execution challenges.

To meet the demand, HAL has established a new facility in Nashik, to ramp up production capacity to 24 jets annually, up from 16.

Follow our market blog to catch all the live action

Initially, an MoU had proposed that GE would aim to deliver 16 engines annually starting in FY23, but subsequent pending approvals have caused further delays in the LCA Mk1A timeline.

Brokerage firm Nomura has lower the GE engine delivery estimate for FY25 from 14 jets to 10.

At 1:23 pm, HAL shares were trading over 1.3 percent higher at Rs 4,827.55 on the National Stock Exchange (NSE). So far this year, the stock has rallied 70 percent, outpacing benchmark Nifty's returns of around 14 percent during this period.

In the 12 months gone by, the counter has rallied 139 percent, more than doubling investors' capital. In comparison, Nifty delivered returns of around 27 percent during this period.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.