Hindustan Aeronautics surges 17% in two days, hits fresh 52-week high

ICRA has assigned a long term rating of double A and a short-term rating of A one plus for the company's bank facilities with stable outlook.

Shares of Hindustan Aeronautics (HAL) climbed 6 per cent to hit a 52-week high of Rs 863 on the BSE on Tuesday. The stock has surged 17 per cent in two days after ICRA assigned a long-term rating of double A and  a short-term rating of A one plus for the company's bank facilities with stable outlook. The government-owned entity's stock surpassed its previous high of Rs 828, hit on November 20, 2019.

“The assigned rating draws comfort from the majority ownership held by the Government of India (GoI) in HAL as well as HAL’s strategic position as a dominant supplier of aircrafts, helicopters, engines, avionics and accessories as well as main provider of maintenance, repair and overhaul services to the Indian defence forces,” the rating agency said in rationale.

The assigned rating also considers the strong order pipeline as reflected by the unexecuted order book of Rs 58,588 crore as on March 31, 2019, it said.

The GoI’s increased focus on indigenisation with the Make in India policy and the establishment of defence corridors and mandatory offset policy for defence procurement by GoI, augur well for the company’s future growth.

HAL’s financial profile is supported by its diversified revenue mix covering sale of products, spares and services for multiple aircraft programmes, as well as the healthy profitability arising from the cost-plus nature of majority of contracts. Due to its large scale and consistently improving operating profitability, the debt coverage metrics remain strong, notwithstanding the recent increase in short term borrowings, the rating agency said.

Meanwhile, Economic Times reported that HAL is set to get a mega order to produce 83 new Light Combat Aircraft in the coming weeks, taking its order book beyond Rs 1 trillion.  However, the defence ministry is likely to remove HAL from Rs 21,000-crore project to manufacture naval helicopters that had been reserved for the private sector, the report said.

At 10:03 am, HAL was trading 5.89 per cent higher at Rs 851 on the BSE. In comparison, the S&P BSE Sensex was trading flat at 41,868 points. The trading volumes on the counter jumped more than 3-fold with a combined 132,647 shares changing hands on the NSE and BSE so far.