Shares of defence manufacturers like HAL and others could be in focus ahead of Defence Minister Rajnath Singh's four-day US visit starting this week.
Rajnath Singh's US visit is seen as critical to ratchet up greater support and commitment from the US establishment and major defence equipment manufacturers for technological collaboration and production opportunities in India, CNBC-Awaaz reported quoting sources.
Two crucial meeting will be widely tracked, one with Defence Secretary Lloyd Austin, and another being a roundtable with US defence manufacturers.
Rajnath Singh has cited the 'Comprehensive Global Strategic Partnership' with USA in ahead of the visit, and said that the meeting with his American counterpart will focus on 'areas of strategic interests, while seeking to strengthen defence cooperation'. During his visit, Rajnath will also meet US Assistant to the President for National Security Affairs Jake Sullivan.
A roundtable with US defence industry on ongoing and future collaborations is being seen as a crucial meeting to drum up support for more companies to tie up with Indian players.
There have been recent, unconfirmed reports citing delays in the supply of GE-404 engines that may have a cascading effect on induction of HAL's Light Combat Aircraft Tejas Mk-1A by the Indian Air Force. The timeline of LCA's induction have been revised more than once since the original schedule was announced.
Moneycontrol has not been able to verify the reports yet.
HAL and GE have an MoU in place and a contract will be signed for transfer of technology to the extent of 80% of the GE's 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 on June 6, 2023 for ToT and manufacturing of GE-414 aero-engine in India for LCA MK2 aircraft. The specific technologies that will be transferred are being working out with GE, HAL has said, adding that more clarity will emerge once the contract is signed. These indigenous productions are for domestic requirements only for now, HAL has confirmed. "We will have to get the permission from GE and then we will be able to export if there is a need. But at present we are working out for our domestic requirements only," HAL said.
Any contract with GE will need to be ratified by the US Congress before it can be considered as final, and once this hurdle is cleared, HAL may take up to three years for deliveries of the fighter aircraft.
The first production series of LCA Mk1A fighter aircraft has completed its maiden flight. HAL's Tejas Mark 2 is an single-engine, multi-role combat aircraft developed by Hindustan Aeronautics for the Indian Air Force (IAF). It is an extension of the HAL Tejas, ramped up with new sensors and powerful engine.
Projects such as LCA Mk2 among other will ensure India and HAL's technological lead in the years to come, the company has said.
HAL has incurred a capital expenditure of Rs 2.16 lakh crore in FY24 on infrastructure and technologies needed to develop systems and platforms needed by the armed forces, and to become Atmanirbhar. HAL received fresh manufacturing contracts of over Rs 19,000 crore and ROH contracts of over Rs 16,000 crore during FY24.
Leading defence public sector utility Hindustan Aeronautics Ltd (HAL) on May 16 reported a 52 percent year-on-year growth in net profit at Rs 4,308 crore for the quarter ended March 31. 2024.
After the Q1 results, Gaurav Dua, SVP, Head of Capital Market Strategy at Sharekhan by BNP Paribas had said they are upbeat on the shares. "HAL is a stock which one should buy and hold. It is a structural story and is going to be one of the key beneficiaries of import substitution in the defence space. The stock has potential to give substantial gains over the next 2-5 years," he added.
Several brokerages have maintained bullish calls on the defence stock after the June quarter results.
Disclaimer: The views and investment tips expressed by 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.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
