Shares of Hindustan Aeronautics were lower by more than three percent in trade on January 21, after an unconfirmed report by a defence news website cited a rockblock to HAL's deal with General Electric for engines meant for India's Light Combat Aircraft Tejas.
However, sources with in the company who did not wish to be named told Moneycontrol that the news report was 'fake and unsubstantiated'.
Defence Minister Rajnath Singh had visited US in August last year to strengthen and widen defence cooperation, amid issues around timely delivery of GE's F-404 engines. The delays had reportedly been attributed to supply chain disruptions at GE Aerospace back then.
Even in the past, there have been unconfirmed reports over delay in the supply of GE engines, threatening to have a cascading effect on the induction of HAL's Light Combat Aircraft Tejas Mk-1A into the Indian Air Force. The timeline of LCA's induction have been revised more than once since the original schedule was announced.
HAL is targetting to deliver 16 LCA Mk1A jets to the Indian Air Force in 2025, with a total of 83 jets by 2029. Project-related delays had already pushed back the first delivery, originally scheduled by March 2024.
The ongoing uncertainty over engine supply has weighed on the stock price, even as HAL faces challenges in terms of timely execution of the IAF order. Shares of HAL are higher by 41% in the last one year, but down by close to 20% in the last six months.
To meet the demand, HAL has established a new facility in Nashik, to ramp up production capacity to 24 jets annually, up from 16.
HAL and GE have an MoU in place for a proposed contract on transfer of technology to the extent of 80% of the GE-414 engine. Under the TOT, HAL will be making 80% of the engines in India, while 20% will be sourced directly from GE. HAL's MoU with General Electric, USA was signed in June 2023 for ToT and manufacturing of GE-414 engine in India, for LCA MK2 aircraft.
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