HAL Stock Soars on US-India Defense Deal

23 Aug 2024 , 11:53 AM

Hindustan Aeronautics Ltd. (HAL) shares rose about 2% on Friday after the United States and India signed the Securities of Supplies Agreement (SOSA) during Defence Minister Rajnath Singh’s visit to the nation.

Rajnath Singh is now in the United States, where his primary focus is on addressing delivery issues with General Electric’s F2404 engines, which are a critical component for HAL’s Tejas Mark-1A fighter jets.

HAL shares fell earlier this month following reports of execution issues at the company.

The military PSU told the Indian Air Force that it would supply 16 LCA Mk1A fighters in fiscal year 2024-2025 and 83 in fiscal year 2029. The first delivery was slated on March 31, 2024, however due to several delays, it has been pushed back to November 2024.

Hindustan Aeronautics has constructed a new plant in Nashik to satisfy rising demand. The new factory is expected to increase manufacturing capacity to 24 jets per year from the present capacity of 16.

The F404 engine’s delivery delays have been mostly caused by supply chain issues at GE Aerospace.

General Electric had expected to provide 16 jets per year beginning in fiscal year 2023, but none have been delivered to date, delaying the delivery of the LCA Mk1A.

Based on this, broking firm Nomura cut its LCA Mk1A delivery forecast to 10 jets from 14 for fiscal year 2025.

HAL shares are currently trading 1.3% higher at ₹4,831. The stock has been unchanged for the past month but has risen 71% so far in 2024.

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