Hindustan Aeronautics IPO Subscribed 46% On Third Day: 10 Things To Know

Hindustan Aeronautics’ IPO was subscribed 46 per cent by 10:45 am on Tuesday, the third day of the public offer. HAL or Hindustan Aeronautics Limited’s IPO had opened on Friday, March 16.

March 20 is the last date to subscribe to the HAL IPO. Out of the total issue size of 3,41,07,525, HAL received bids for 157.5 lakh.

Hindustan Aeronautics (HAL) is a fully-owned Government of India undertaking under the administrative control of Ministry of Defence, Department of Defence Production.

The authorised capital of HAL is Rs. 600 Crore consisting of 60,00,00,000 equity shares having face value of Rs. 10 each.

The current programs under progress of the IPO-bound Hindustan Aeornautics are production of SU-30 MKI, Hawk-AJT, Light Combat Aircraft (LCA), DO-228 Aircraft, Dhruv-ALH and Cheetal Helicopters, Repair Overhaul of Jaguar, Kiran MkI/IA/II, Mirage, HS-748, AN-32, MiG 21, Su-30MKI, DO-228 aircraft and ALH, Cheetah / Chetak helicopters.

The Company takes up maintenance and overhaul services to cover the life cycle requirement of all the old and new products. Presently, 13 types of aircraft/ helicopters and 17 types of engines are being overhauled.

In addition, facilities exist for repair/ overhaul of various accessories and avionics fitted on aircraft of Russian, Western and Indigenous designs.

Here are 10 things to know about the Hindustan Aeronautics (HAL) IPO:

1. Hindustan Aeronautics Price Band: Price band for HAL IPO has been fixed at Rs. 1,215 to Rs.1,240. The floor price is 121.5 times of the face value and the cap price is 124 times of the face value.

2. HAL Floor Price: The HAL IPO’s floor price is quite high. The average cost of acquisition of equity shares is Rs. 152 per equity share (after considering the impact of buyback of equity shares in March 2016 and November 2017). Keeping this in mind the price at the upper end of price band is Rs. 1,240 per equity share.

3. Navratna Company: In June 2007, Hindustan Aeronautics was notified as a Navratna company by the department of public enterprises. As a Navratna company, the company was eligible for some enhanced delegation of powers to the Board, including having greater autonomy to incur capital expenditure for our projects without the government’s approval.

This allows the company to make investments in joint ventures and subsidiaries in India and abroad, if any, subject to an investment ceiling set by the GoI.

4. P/E Ratio: The Hindustan Aeronautics Ltd (HAL) price equity (P/E) ratio at the lower end of price band is 16.64 while the ratio at the upper end of price band is 16.99

5. Cash Flows and earnings per share: The HAL earnings per share (EPS) of fiscal 2017 and fiscal 2016 are Rs. 73 and Rs. 42. The company has total assets of Rs. 51,552 crore as on March 31, 2017, against Rs. 56,532 crore as on March 31, 2016. Besides, the company has cash and cash equivalents of Rs. 11,153 crore as on March 31, 2017, and Rs. 13,303 crore on March 31, 2016.

6. Company’s RoNW: The HAL return on net worth (RoNW) for fiscals 2017 and 2016 are 21 and 18.

7. Limitations of HAL: HAL depends largely on ministry of defence contracts. A decline of funding in the defence budget or delays in the budget process could adversely affect the company’s ability to grow or maintain our sales, earnings, and cash flow.

8. Hindustan Aeronautics (HAL) main operations: HAL operates in the defence sector and is engaged in the design, development and manufacture of aircraft, helicopters, engines and accessories, as well as offering repair and overhaul services and the supply of spares.

9. Hindustan Aeronautics (HAL) competitors: The company faces competition from other international companies, many of which have substantially greater resources.

The competitors include Lockheed Martin, Saab, Airbus Helicopters, Bell Helicopters, Leonardo, Boeing, BAE Systems and UGMK (LET Kunovice Aircraft Industries).

10. Hindustan Aeronautics (HAL) subsidiaries: The company has two subsidiaries Naini Aerospace and Indo Russian Helicopters. HAL also 14 joint ventures including International Aerospace Manufacturing Private Limited and Multirole Transport Aircraft.