After Rs 21,000-crore turnover in 2019-20, HAL eyes higher growth this year

Military still owes HAL Rs 19,000 crore, IAF alone owes Rs 14,400 crore (Above: Dhruv chopper delivery line)

By Ajai Shukla

Business Standard, 1st April 2020

Hindustan Aeronautics Limited (HAL) announced on Tuesday a record turnover of over Rs. 21,100 crore (provisional and unaudited) for 2019-20. This amounts to a growth of 7 per cent over the previous year’s turnover of Rs. 19,705 crores.

This achievement comes despite “difficulties in cash flows, interruptions in operations due to workmen agitation and the interruption arising in the month of March due to Covid-19 lockdown which has affected the final tests and certification of certain additional aircraft that were under final stages of production,” said HAL in a press release.

During the year 2019-20, HAL says it has delivered 31 aircraft/helicopters and 117 new engines. It has also overhauled 199 aircraft/helicopters and 490 engines.

Speaking to Business Standard after the announcement, HAL’s chairman, R Madhavan, said the company’s healthy order book made it likely that the coming year would see similar growth.

Madhavan said the Tejas light combat aircraft (LCA) would now constitute HAL’s big new income stream, with the company intending to deliver 12-14 Tejas Mark 1 fighters in the final operational configuration (FOC) next year. Of these, five are already almost complete, but could not be delivered during the current year because of the Covid-19 lockdown.

With each Tejas Mark 1 priced at about Rs 200 crore, the production line would generate Rs 2,400-2,800 crore next year.

In addition, HAL is gearing up to build 83 LCAs in the more sophisticated Tejas Mark 1A configuration, an order the defence ministry has cleared and is awaiting final approval from the cabinet. HAL will begin building those after delivering the 40 Tejas Mark 1 fighters already on order.

Next year will see HAL winding down its longstanding cash cow: the Sukhoi-30MKI production line in Nashik. In 2019-20, HAL delivered 12 Sukhoi-30MKI fighters, while the delivery of another four was held up by the Covid-19 lockdown, said Madhavan. 

With those being delivered shortly, HAL will have completed delivery of all the 222 Sukhoi-30MKIs the Indian Air Force (IAF) has ordered. Thereafter, the Nashik production line will close until the IAF orders another 12 Sukhoi-30MKIs, a contract it is still processing.

This year, HAL also built and delivered 21 new AL-31 engines, which power the Sukhoi-30MKI. That leaves another 27 AL-31 engines on order, which Madhavan says will be delivered in 2020-21.

HAL is using its Nashik line to progressively overhaul the IAF’s Sukhoi-30MKI fleet. This year, HAL earned over Rs 1,000 crore by overhauling 13 fighters and is looking to raise that next year.

HAL is also generating a growing income from its helicopter production line in Bengaluru. In 2019-20, it delivered 13 Dhruv advanced light helicopter (ALH) to the army against the 10 it was scheduled to deliver. In 2020-21, HAL will begin delivering the navy’s and coast guard’s orders of 12 Dhruvs each; and those remaining from the army’s order of 40.

Negotiations are also under way for manufacturing 15 Light Combat Helicopters (LCH) for the IAF and army. Madhavan says HAL has already started building the LCHs so that delivery could begin in short order once the contract is signed.

During the current year, HAL generated an unprecedented income of Rs 9,000 crore on spares, overhauls and upgrades. The company cites the cockpit upgrade of the Dornier-228, the avionics upgrade of the Hawk trainer and the fitment of the BrahMos missile on the Sukhoi-30MKI as “game changers” for HAL.

However, HAL continues facing cash flow problems due to payment delays by the military. 2019-20 saw collections of over Rs 18,000 crore from the army, navy and IAF, but Rs 19,000 crore remains outstanding from the three services.

This includes Rs 14,400 crore outstanding from the IAF, HAL’s biggest customer.

However, Madhavan is optimistic about this situation being remedied. “Two years back, the problem was worse, but collections are improving. In another year, we should be out of the woods,” said the HAL chairman.