Hindustan Aeronautics is involved in the design, production, repair, overhaul, upgrade, development, and servicing of a wide range of products including, aircraft, helicopters, aero-engines, accessories, aerospace structures and avionics.
Its operations are divided into 5 complexes, namely the Bangalore Complex, MiG Complex, Helicopter Complex, Design Complex and Accessories Complex, which together consist of 20 production divisions and 11 research and design centers situated across India.
Hindustan Aeronautics Limited depends on research as well as technology transfer and licence agreements to make its products. In addition, it has entered into 13 commercial joint ventures to increase operations.
HAL was granted the Navratna status by the Government of India in June 2007 which gives it with strategic and operational autonomy and more powers to make prompt investment decisions, subject to an overall investment limit set by the Government of India.
The company signs a Memorandum of Understanding with the MoD on a yearly basis, which gives different targeted performance criteria for a given year. Hindustan Aeronatics has also received an Excellent rating from the Government of India every year from the Financial Years 2002 to 2016.
|16 – 20 March 2018|
|Price Band||INR1,215 – 1,240 (Discount of INR25 per share for retail investors)|
|Offer For Sale||34,107,525 shares (INR4,144.06 – 4,229.33 crore)|
|Total IPO size||34,107,525 shares (INR4,144.06 – 4,229.33 crore)|
|Minimum bid (lot size)||12 shares|
|Face Value||INR10 per share|
|Listing On||NSE, BSE|
|Profit after tax||3,217.2||2,541.1||929.0||2,011.1||2,630.8||384.5|
HAL IPO Opening Date: 16 March 2018
HAL IPO Closing Date: 20 March 2018
Finalisation of Basis of Allotment: 26 March 2018
Initiation of refunds: 27 March 2018
Transfer of shares to accounts: 27 March 2018
Listing Date: 28 March 2018
The President of India, acting through the Department of Defence Production, Ministry of Defence is the promoter of Hindustan Aeronautics Limited.
The promoter presently holds, 100% of the pre Offer paid up Equity Share capital of the company. Assuming the sale of all Offered Shares, the Promoter shall have stake of approx. 90% of the post Offer paid up Equity Share capital of the Company.
As of December 31, 2017, Hindustan Aeronautics’s order book was Rs.68,461 crores which generally consists of products and services to be produced and delivered and excludes expected revenues from their joint ventures and subsidiaries.
Hindustan Aeronautic Limited’s main competitors in the aircraft and helicopter production segment operations are companies such as Lockheed Martin, Saab, Airbus Helicopters, Bell Helicopters, Leonardo, Boeing, BAE Systems and UGMK (LET Kunovice Aircraft Industries).
Since there is no listed companies in India that are directly comparable to the business carried on by Hindustan Aeronautics Ltd. Hence, we cannot make any comparison.
At a time when companies are asking for high valuations for their public issues, this company’s valuations look modest. Hindustan Aeronautics Limited’s IPO is priced at less than 16 times earnings.
But, in fact, even that seems high when we compare valuations with growth.
Revenue and earnings growth have been not much to write about. For the financial year 2017 (FY17), net revenue rose 7 % year on year whereas pre tax and exceptional earnings rose 11.7 % mainly due to a fall in income from other sources.
In the first 6 months of this financial year FY18, the Hindustan Aeronautics operating profit margin decreased to 9% from 18% in FY17.
An analyst said that it that should not concern investors. Given the uneven nature of the business where performance relies to a good extent on the delivery schedule of aircraft, it would not be fair to evaluate the company’s financials on a quarterly or half yearly basis.
In fact, for the half year ended September, revenue accounted for only 29% of previous year’s amount.
Still, investors looking for a listing pop in India’s largest defence Public Sector Unit (PSU) could well be upset.
Arun Kejriwal, director of Kejriwal Research and Information Services Pvt. Ltd said that it is a nice plane to travel in but I would not bet my money on it. The company’s capacity expansion and growth plans are not that exciting.
Another analyst said the Public Sector Unit tag is a bit of a drag, not only in consideration to investor perception, but also in the way the company chases growth opportunities. Investors can anticipate steady growth with this company.
Further, the company’s biggest client is the Indian defence services contributing a high revenue of over 90 % for the half year ended September and for FY15-FY17. And that’s a key risk.
A fall or reprioritization of funding in the defense budget or postponing in the budget process could impact the company’s ability to grow or maintain its sales, earnings, and cash flow.
On the other side, investors will be purchasing into a company with steady financials. On certain criteria, the company does seem to make a good candidate from a long-term perspective. For instance, it has a strong order book worth Rs 68,461 crore offering modest revenue visibility.
The balance sheet is strong with cash and cash equivalents of Rs. 11,700 crore, no borrowings and a net worth of Rs 12,943 crore as of 30 September. It has a steady track record of paying dividends. For FY 17, its dividend payout was at Rs 1,000 crore, which works out to a dividend payout ratio of 37%.
Some brokerage firms have recommended investors to subscribe with a long-term view, which is a respectful way of saying that they cannot anticipate decent returns anytime in the near future.
If you have no knowledge of the equity markets but are looking to gain from the equity markets, mutual funds are ideal. Investments can be made in Mutual Funds since they provide a wide variety and also the amount of investment can vary as per investor’s preference.
Many mutual funds invest in IPOs – many times at discounted rates that are not available to retail investors.
It is necessary to not get carried away by the hype surrounding IPOs. Don’t jump into IPO if you do not have the necessary skills.
In a mutual fund, a skilled and trained professional handles all investments for you and therefore, you can benefit from the equity markets without spending too much time gaining the skills needed to understand the markets.
Investment can be made via lump sum investment or through SIP (Systematic Investment Plan) mode in any of these funds.
Moreover return is something that cannot be promised but these return estimates have been given on the basis of past performance.
Mutual Funds for 2018
Large Cap Fund:
These funds invest in large companies that have a history of good performance and stable balances.
Mid Cap Fund:
These are funds that are high risk – high return. They’re a bit riskier than large cap funds.
Small Cap Fund:
These are the funds that you can invest in if you want very high growth. They are a very high risk too.
Disclaimer: the views expressed here are of the author and do not reflect those of Groww.