Hindustan Aeronautics Limited IPO Review

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Hindustan Aeronautics Limited IPO

Hindustan Aeronautics Limited IPO
8.4

Company Background

8.5 /10

Price Band

7.0 /10

Company Financials

9.0 /10

Industry Situation

9.0 /10

Reliability

8.5 /10

Pros

  • Experience Leadership
  • No Competition
  • Multiple Clients

Cons

  • Funding not to be used for Business Goals
  • HAL is getting Asset Light
IPO Name Hindustan Aeronautics Limited IPO Newgen Software Technologies Limited IPO
Opening Date 16th March, 2018
Shares Issue Size 34,107,525 34,107,525
Face Value ₹10
IPO Price Band ₹1215 - ₹1240
Bid Lot 12
Total Bid Amount ₹14,580 - ₹14,880
Listing At NSE, BSE
Retail Allocation 35%
Estimated IPO Size ₹4,144.06 Crore - ₹4,229.33 Crore
Day# No. of Shares Subscribed Shares Subscription %age
Day 1 NA NA
Day 2 NA NA
Day 3 NA NA

 

Hindustan Aeronautics Limited Background

Hindustan Aeronautics Limited can be termed as old as the Aeronautics industry in India. It was originally established in the 1940s by an authorized capital of 4 Crore with Government of India picking up a stake in the company in 1941. It eventually took over the management of the company in 1942. Then in 1964, Hindustan Aeronautics Limited became a wholly Government-owned company.

In terms of the business structure, Hindustan Aeronautics Limited has bifurcated it into 5 different complexes, namely:

  • Bangalore Complex
  • MiG Complex
  • Helicopter Complex
  • Accessories Complex
  • Design Complex

Ahead to that, there are 20 production divisions and 11 R&D centres. To complement their business further,  Hindustan Aeronautics Limited has entered into 13 joint ventures on a commercial level.

At the onset, some of the aircraft machines that Hindustan Aeronautics Limited took into manufacturing were Harlow Trainer, Curtiss Hawk Fighter and Vultee Bomber Aircraft. The business has its operations across the whole product life-cycle of Aero-products such as aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures. This life-cycle includes the design, development, manufacturing, maintenance, upgradation, servicing of the manufactured products etc.

Although HAL is now a wholly Government-owned enterprise, it provides its products and services to corporates, state governments and several para-military forces, bringing in additional revenue for the company.

Hindustan Aeronautics Limited is known for multiple reasons, including:

  • Providing maintenance and repair services to MiG-29 aircraft machines for Indian airforce that were bought/procured from third parties.
  • Offering life-cycle support for aircraft and helicopters for the last 40 years or so apart from working on few upgrades for clients.
  • High focus on Research & Development and the company has been able to achieve 2 trademarks,  seven patents, 11 design registrations and 77 copyrights. In fact, HAL allocates 10% of its operating net profit to R&D related activities.
  • Since President of India stays as the promoter of the company, there is a huge support factor associated with HAL from the Government of India.
  • Although they come from a very specific industry, still Hindustan Aeronautics Limited offers a wide range of product offerings to its clients.
  • Some of its international clients include Airbus, GE Aviation, Rolls Royce, Vietnam Air Force, Mauritius Police Force and so on.

The overall Hindustan Aeronautics Limited IPO is being managed by SBI Capital, Axis Direct & Karvy Online.

Hindustan Aeronautics Limited Management

Shri T. Suvarna Raju – Chairman & MD

Shri T. Suvarna Raju joined at the position of a management trainee at Hindustan Aeronautics back in 1980 and has held different positions in the company since then. Some of these positions include titles such as Director of Operations, additional Charge of the post of Chairman, Managing Director, Director, Chairman & Managing Director to name a few.

He was appointed as the Chairman of HAL on March 5, 2015.

As far as the educational background is concerned, Shri T. Suvarna Raju holds a Mechanical Engineering degree, an MBA from the Bangalore University and Masters of philosophy in defence and strategic studies from the University of Madras.


Shri Daljeet Singh – CEO

Like Shri T. Suvarna Raju, Shri Daljeet Singh also started his career in Hindustan Aeronautics as a management trainee, although a little earlier i.e. in 1979. He has been instrumental in taking forward a lot of business projects at HAL including MiG-21, 27 & Su-30MKI Aircraft, SU-30 to name a few.

Daljeet Singh not only looked at the overall management of these projects but was actually hands-on involved in other phases such as Manufacturing, Assembly, Testing and ROH of various variants of different products.

Again, if we talk about the academic background of the CEO of HAL, Mr Daljeet Singh has done his graduation in the field of Mechanical Engineering.

Looking at the background of the leadership at Hindustan Aeronautics, there is one big differential in favour of the company.

The commitment!

Not only the above-discussed business leaders at HAL, some of the other top management employees at HAL have been associated with the company for 3 decades or more. This shows that such highly-experienced leaders of the Industry chose to stay with the company for such a long duration.

This is certainly one of the positives signs for a mature company like HAL where the business is trusted by its employees such a long duration. Furthermore, these leaders have a wide experience in the industry and are experts in different business domains.

Thus, if you are looking to invest in HAL, from the management perspective, the company looks pretty solid!

Hindustan Aeronautics Limited IPO Data Points

Hindustan Aeronautics Limited IPO opens up for retail bidding on 16th March 2018 with the total issue size of 34,107,525 shares.  The overall retail allocation is 35% out of the total issue size with a face value of ₹10.

The IPO price band has been kept in the range of ₹1215 to ₹1240, thus, making the total IPO valued at a mammoth amount of ₹4,144 Crore to ₹4,229 Crore.

If you are looking to invest your money in this IPO, then you need to invest in lots of 12 shares each, totalling the minimum bid value to ₹14,580 t0 ₹14,880. Then, with the maximum retail IPO limit of up to ₹2 Lakh, you can further apply for this IPO in lots of 12 shares each.

At full investment cap, you will be able to bid for a total of (₹2 Lakh/₹14,880) = 13 lots or (13X12) = 156 Shares. Furthermore, the total amount you can bid in this IPO will stay at ₹1,89,540.

Also remember, you can apply for 156 shares only with a single PAN card and in case, you wish to apply for more, then you may choose to use the demat account of your family or friends.

Hindustan Aeronautics Limited Financial Performance

 

In the DRHS document of Hindustan Aeronautics Limited IPO, the company chose to disclose the financial details of their performance for the last 3 years only.

Let’s look at these numbers one by one.

HAL is certainly getting asset-light on a yearly basis, as you can see from the overall yearly levels that are down to ₹51,552 Crore in 2017 from ₹62,420 Crore in 2015. That is a drop of around 17.5% in a gap of two years.

Then, from the Top of the line or Revenue perspective, HAL has seen a consistent increase the revenue capitalization from different streams including Operational, financial and investment activities.

Furthermore, if we talk about Profit, Hindustan Aeronautics Limited has not only been able to increase its profit margin but also bring in cost-effective techniques to lower its overall expenses. This move has directly assisted in improving the profit margin at both monetary and percentage levels on a yearly basis.

However, there is no other company of this size in this Industry in India that can help us to create any benchmark. Yes, there are few global peers but then there are different macro and microeconomic issues that pitch in and then deviate the whole picture altogether. Thus, we believe it is not fair for neither HAL or any international company to be compared to each other on financial aspects.

Nonetheless, considering HAL as any company in any industry, the numbers certainly look promising, at least for the last 3 years (previous years’ numbers are not available, nor those have been disclosed by the company).

Hindustan Aeronautics Limited IPO Objective

There are 2 primary reasons for this IPO issue.

  1. Set up disinvestment of 36,150,000 shares in the name of the shareholder that constitutes 10% equity in HAL’s pre-Offer paid up Equity Share capital. The funds raised by selling out these shares will NOT go to the business but to the shareholder’s account.
  2. Achieve the benefits of getting listed on the stock exchanges including improvement in the brand visibility of HAL to go along with an increase in consumer trust and brand image.

In simpler words, no portion of the monetary funds raised through this IPO will go to HAL and used in any of the business objectives and goals.

What does this imply?

This basically means, the 10% shareholder i.e. GoI is looking to exit of its current position in the company at a value which is obviously not offered by the business itself. With this IPO, GoI will be making much better an exit in terms of the overall valuation they get through IPO bidding.

Having said that, this can be seen as a win-win for all parties (including GoI, HAL and the shareholders) assuming the listing does well on the exchange.

Hindustan Aeronautics Limited IPO Events

Event Date
IPO Open Date 16th March, 2018
IPO Close Date 20th March, 2018
Finalization of Basis of Allotment 26th March, 2018
Initiation of Refund 27th March, 2018
Credit of Shares to Demat Accounts 27th March, 2018
Listing on Exchange 29th March, 2018

 

As shown above, the IPO opens up for bidding on 16th March 2018 and will stay open for bidding until 20th March 2018. Then most likely by 26th March, the decision on finalization of allotment will be done which will be followed by shares getting credited to your demat account by 27th March 2018.

In the meantime, in case you do not get any allotment, your blocked money in your bank account (assuming you used ASBA for IPO application) will be unblocked by 27th March 2018 itself.

Finally, Hindustan Aeronautics will be getting listed on NSE and BSE on 27th March 2018.

Here are some pictures from Hindustan Aeronautics Limited (credits Hindustan Aeronautics Limited):

Hindustan Aeronautics Limited Contact Information

In case, you are looking to get in touch with Hindustan Aeronautics Limited, here is how you can get in touch with them through different communication channels:

Corporate Info:

HAL Corporate Office
15/1 Cubbon Road
Bangalore 560 001
India
Tel : 91 – 80 – 22320701, 22320903, 22320376

Corporate Media Communication:

HAL Corporate Office
15/1 Cubbon Road
Bangalore 560 001,
India
Tel : 91 – 80 – 22320934
Fax : 91 – 80 – 22320334
halmedia@hal-india.com

Customer Services & Quality Assurance Department:
15/1 Cubbon Road
Bangalore 560 001,
India
Tel : 91 – 80 – 22320578
Fax : 91 – 80 – 22320275
customer-service@hal-india.com

Hindustan Aeronautics Limited Recommendation

After looking at various aspects including HAL’s background, management, financial performance, future goals etc, this Hindustan Aeronautics Limited IPO certainly looks a good bet for both short and long-term investments.

You can expect a short-term quick profit once the company gets listed through the IPO, but if you are a looking for some quick profit, it’s better to exit once you feel you have made a decent profit. At the same time, if you are looking to stay with the shares, then keep the horizon period to at least 3-4 years (maybe more as well) to gain a sizable return on your investments.

Simply, keep your options open and go for it!


* The recommendation is just our viewpoint and you are advised to check with your financial advisory and/or stockbroker before investing any money in this IPO. A Digital Blogger bears no responsibility in such investments and the corresponding profits/losses.

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