HAL shares drop up to 9% after Tejas fighter jet crashes in Dubai: Here's what analysts say

The shares of Hindustan Aeronautics (HAL) dropped nearly 9 percent in the early trading hours of November 24 after a Tejas fighter jet manufactured by the Indian PSU company crashed during a Dubai Air Show on Friday, causing the death of an IAF officer.

HAL shares fell to Rs 4,205.25 apiece on BSE in the morning trading hours of Monday, the lowest level seen by the stock in more than 7 months. The stock then recovered some losses to close more than 3 percent lower at Rs 4,443 apiece.

Defence stocks in red:

HAL's defence peers also fell in trade on Monday, pushing the Nifty Defence index down more than 2.5 percent to close at 7,912.80. Mishra Dhatu Nigam (Midhani) shares were the top loser on the index, falling more than 5 percent. Notably, the PSU company is a key domestic producer of superalloys, titanium, special purpose steel and other special metals, and is a supplier to HAL.

BEML, GRSE and Astra Microwave Products shares fell around 4 percent each, while Bharat Electronics (BEL) shares closed more than 3 percent lower to emerge as the top Nifty 50 loser.

Tejas fighter jet crash: All we know so far

The fighter jet crashed while performing manoeuvres in front of a large audience in the afternoon of November 21. Videos circulating online show the jet, which was a single-seat light combat aircraft (LCA), plunging down to the ground and flames erupting immediately at the site.

A plume of black smoke rose above Al Maktoum International Airport at Dubai World Central, drawing the attention of onlookers as sirens rang out in the aftermath of the crash. The IAF, in a statement, confirmed the death of pilot in the crash.

"An IAF Tejas aircraft met with an accident during an aerial display at the Dubai Air Show today. The pilot sustained fatal injuries in the accident. Indian Air Force deeply regrets the loss of life and stands firmly with the bereaved family in this time of grief. A court of inquiry is being constituted to ascertain the cause of the accident," The Indian Air Force (IAF) said.

About the Tejas aircraft:

Tejas is single-engine, 4.5-generation multirole combat aircraft with a delta wing design. It is developed by the Aeronautical Development Agency (ADA) and manufactured by Hindustan Aeronautics Limited (HAL) for the Indian Air Force (IAF).

The incident marks the second case involving a Tejas aircraft in less than two years. Earlier in March 2024, a Tejas fighter jet crashed in Rajasthan's Jaisalmer while returning from a tri-services military exercise in Pokhran desert in the first accident involving the indigenously-built single-engine jet since it began flying in 2001.

HAL clarification:

HAL issued a clarification on November 24, stating that the Tejas crash was "an isolated occurrence arising out of exceptional circumstances". "We would like to assure that there is no impact on the Company’s business operations, financial performance or its future deliveries," it added.

The Indian PSU company said that it is extending its full support and cooperation to the agencies conducting the investigation. "The Company will continue to keep the stakeholders informed of any material developments," it added.

Here's what analysts say:

Historically, HAL shares have declined whenever one of its aircraft crashed earlier, like in March 2024 and February 2019, said Abhinav Tiwari, Research Analyst at Bonanza.

"The reaction may improve only if HAL confirms that there is no major technical issue. The stock may recover gradually if the crash does not affect future deliveries or export plans," he added.

Siddharth Maurya, Founder & Managing Director at Vibhavangal Anukulakara, said that the Tejas crash at the Dubai Airshow will bring immediate sentiment pressure on HAL, and a certain degree of short-term volatility in the stock cannot possibly be avoided.

'Such isolated incidents seldom impact the long-term valuations'

He however added that such isolated incidents seldom impact the long-term valuations unless they expose some structural flaw. "HAL still has an enviable order book, including large contracts for Tejas, and is central to India's defence ecosystem," he said.

"For investors, key things to track would include delivery discipline, technical clarity from HAL, and the ability of the company to sustain earnings momentum," he further said, adding that if such operational confidence is maintained, any correction could turn into an opportunity rather than a setback in the long term.

'Incident does introduce short-term reputational risk'

Harshal Dasani, Business Head at INVasset PMS, said that a sentiment shift around HAL after the crash is understandable. "When a frontline indigenous fighter suffers an accident on a global stage, it triggers immediate questions on reliability, export readiness, and operational safety. Even though the government clarified that earlier concerns around oil leakage were unfounded and unrelated, the incident still places HAL under heightened scrutiny at a time when expectations are exceptionally high," he said.

This analyst also noted that HAL enters the phase with one of the strongest order books in the company’s history, including the recent mega order for 97 Tejas units and ongoing demand for helicopters and engines. However, he pointed out elevated valuations. "Trading at elevated valuation multiples, the market was assuming flawless execution and uninterrupted momentum in India's defence-manufacturing push. An incident like this doesn’t change the long-term trajectory, but it does introduce short-term reputational risk, and investors typically move to reassess risk-reward when valuations are rich," Dasani said.

HAL share price: Buy, sell or hold?

Elara Capital kept a 'Buy' call on HAL shares, with a target price of Rs 5,680 per share. This implies an upside potential of nearly 24 percent from the stock's previous closing price. The domestic brokerage noted that the accident is expected to have no major financial impact is on company orders or deliveries.

It however added that Tejas Mk 1A exports may be delayed despite stable domestic orders.

CLSA kept an 'Outperform' call on the stock, with a target price of Rs 5,436 apiece. This implies an upside potential of more than 18 percent from the stock's previous closing price. Citing experts, the international brokerage said that the possible causes of the incident include General Electric's GE engine thrust loss, aerodynamic stall effects, or human error.

CLSA sees volatility as a chance to accumulate due to HAL's $54 billion pipeline.

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(With inputs from agencies)

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