India's largest aeronautics company continues to battle a crippling cash crunch as pending dues from the government—its biggest client—nearly doubled since March last year, forcing the state-owned entity to raise debt to run its daily operations.
Cash balance of Hindustan Aeronautics Ltd. was nearly wiped out over the last one year at Rs 140.49 crore as of March 2019, according to its exchange filings. Its receivables—or payments from clients—jumped two-fold to Rs 13,938 crore. The receivables now account for 70 percent of the company's annual consolidated revenue from operations, 98 percent of which comes from the Ministry of Defence, according to its 2018 annual report.
HAL's revenue from operations rose 6.82 percent over the last year to Rs 19,894 crore in 2018-19. Its profit after tax also rose 13.8 percent to Rs 2,264.77 crore.
Despite this, the company raised short-term loans to meet its working capital needs as receivables rose. Short-term borrowings jumped fivefold over the last year to Rs 4,058.1 crore as of March 2019, the filing showed. Borrowings had declined to Rs 21 crore in September.
The company's liquidity crisis worsened further in the fourth quarter. Its finance costs rose five times in a year to Rs 169.60 crore as of March—most of which came in the final three months of the last financial year.
To be sure, HAL doesn't have any agreement with the government to recover finance cost that it incurs in case it raises debt for operations owing to delay in payments by the government, the company's management had clarified in February on the sidelines of the Aero Show.
Still, the company paid an interim dividend to its shareholders—the largest is the government—for financial year 2018-19. HAL, which is 90 percent owned by the government after its listing in March 2018, paid an interim dividend of Rs 19.80 apiece in March, leading to a total payout of Rs 662 crore.
HAL has yet to respond to BloombergQuint's emailed queries.
Delayed Payment To Creditors
The delay in internal accruals impacted HAL's creditors as it took longer to pay them.
The company's trade payable balance—the amount a company owes its vendors for the goods received—rose 57.62 percent year-on-year to Rs 2,625.48 crore at the end of March 2019.
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