HAL may move up on sell-off agenda

[thestringshredder]

With the disinvestment plan in Coal India Ltd (CIL) hitting trade union hurdles, the government may shift its focus to other companies like Hindustan Aeronautics Ltd (HAL) to meet the sell-off target for the current fiscal. The department of disinvestment has already appointed book running lead managers (BRLMs) for a 10% stake sale in defence PSU HAL through an initial public offering (IPO).


The government expects to mop up nearly $2 billion from the proposed sale of its stake in the PSU. The Union Cabinet had approved the proposal for HAL stake sale last November.

Under its disinvestment programme for the current fiscal 2013-14, the government has targeted to raise R40,000 crore. It has kicked off the programme with a stake sale in MMTC Ltd recently.

The price band and the timing of the IPO will be decided by the government in consultation with BRLMS and HAL, depending on the market conditions.

“HAL will need to spend $4 billion in the next five to seven years to build additional capital and human infrastructure to support the aircraft programmes”, an official said.

HAL is a premier aeronautical complex in Asia with 19 production divisions and 10 R&D centres. Its expertise encompasses design, production, repair, overhaul

and upgrade of aircraft, helicopters, aero-engines, accessories, avionics and systems. The 19 divisions of HAL are equipped with modern infrastructure for production of fighter aircraft, trainer aircraft, transport aircraft and helicopters. It provides one-stop solutions for all the design needs of aircraft and helicopters in airframes, airframe systems, avionics, mission & combat systems, using advanced design tools.

HAL,having a turnover in excess of R14,000 crore, will be the third defence PSU, out of a total of nine, to witness a disinvestment programme. The state has already divested a part of its stakes in two defence PSUs; 25% stake in Bharat Electronics Ltd (BEL) and 34% in Bharat Earth Movers Ltd (BEML).

The stake sale of HAL is expected to be made in November-December, The government has appointed four merchant bankers — SBI Cap, Goldman Sachs, Barclays and Axis Capital—to managing the stake sale.

“Merchant bankers are conducting due diligence on 29 production divisions, nine joint ventures and ten research & design centres,” said an official, adding the defence ministry is working on restructuring the company’s board.

The Cabinet had approved a sale of 1.2 crore equity shares, amounting to 10% stake, in the Navratna defence equipment maker.

The paid-up capital of HAL is Rs 120.50 crore, comprising 12.05 crore shares of a face value of R10 each. The government holds 100% stake in the company.

The government is in the process of modernising the company, for which R20,000 crore would be required over the next five years. The government had set up expert groups under former cabinet secretary

BK Chaturvedi for the restructuring of HAL.

In the proposed IPO, a 5 % discount on the issue price will be allowed for retail investors as well as for eligible employees of HAL applying under the employees’ reservation portion.

HAL achieved a new financial high with a turnover of R14,316 crore in the financial year 2012-13 (provisional figures). The profit before tax for the FY 2012-13 stands at R3,471 crore. The company has declared an interim dividend of R823 crore for the financial year.

“We strive to live up to the expectations of our stakeholders”, says RK Tyagi, chairman, HAL. The company’s return on shareholders’ investment is impressive, comparable to some of the best companies anywhere, he adds.

The defence major, being a technology driven company, continues its thrust on R&D, by incurring R1,749 crore, or 12% of its turnover, towards it. The company has filed a record 32 patents in 2012-13.

The year witnessed landmark events such as handing over of the first weaponised advanced light helicopter (ALH) “Rudra” to the Indian Army, exports of Cheetah helicopters to the Republic of Surinam and Do-228 light transport aircraft to Seychelles as well as the first flight of Jaguar DARIN-III and light combat aircraft (LCA) naval prototypes.

HAL has a workforce of around 33,600, with over 50% having more than a decade of aircraft industry experience. It has also diversified into manufacture and repair /overhaul of industrial and marine gas turbine engines, and manufacture of structures for aerospace vehicles.

The company has developed expertise in aircraft upgrades with successful programmes like MiG-27M, Jaguar, Sea Harrier, HS-748 (Avro) and Do-228, and upgrade of Mirage-2000. Integration of modern systems like multi-mode radar, advanced avionic systems, secure communication system, radio altimeter, IFF equipment, mission computer, modern EW suite, global positioning system, etc., are carried out to enhance the capabilities of the aircraft, as per user requirement.

HAL plans to foray into the civil segment, which is forecast to have promising growth. Separate operations are planned to handle the civil segment, including suitable partnerships with private Indian industries and foreign operators.

The company has plans to add capacity to handle future programmes like medium multi-role combat aircraft (MMRCA), fifth generation fighter aircraft (FGFA), multi-role transport aircraft (MTA), light combat helicopter (LCH) and light utility helicopter (LUH). The LUH has gone past the design phase with successful realisation of the ground test vehicle, MTA has entered the conceptual design phase and the FGFA will be entering the detail design stage.

In line with HAL’s mission to become a global player, exports have been identified as a key thrust area. The company has entered the global market with a diverse portfolio of products & services in the aerospace sector.

The company has supplied high precision structural & composite work packages and assemblies to aviation majors like Airbus (forward passenger doors for A-320 family), Boeing (uplock box for B-777), Ruag, and Honeywell.

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