Shares of Hindustan Aeronautics Ltd. gained the most since August last year after the cabinet approved procurement of ‘Tejas' aircraft for the Indian Air Force.
The cabinet approved procurement of 73 Tejas Mk-1A fighter aircraft and 10 Tejas Mk-1 trainer aircraft, according to a Press Information Bureau statement. The total cost for the aircraft will be Rs 45,696 crore, along with design and development sanctions worth Rs 1,202 crore, it said.
“The manufacturing of light combat aircraft by Hindustan Aeronautics will give a further push to Atmanirbhar Bharat initiative and boost indigenisation of defence production and the defence industry in the country,” the note said. Around 500 Indian companies, including micro, small and medium enterprises in the design and manufacturing sectors, will be working with HAL in this procurement.
The LCA-Tejas programme will act as a catalyst for transforming the Indian Aerospace manufacturing ecosystem, Defence Minister Rajnath Singh said in a tweet on Wednesday.
The LCA-Tejas programme would act as a catalyst for transforming the indian aerospace manufacturing ecosystem into a vibrant Atmanirbhar-self-sustaining ecosystem. I thank the Prime Minister Shri @narendramodi for this historic decision taken by the CCS today.
“Net-net it's a positive development but execution it is going to be a key issue,” Avinash Gorakshakkar of Profitmart Securities, told BloombergQuint over the phone. “The problem with such PSUs, even the likes of NBCC Ltd., they have a very large order book but execution is very slack. The markets would like to know how quickly it gets executed.”
The timeline of the cash conversation cycle, according to Gorakshakar, is key. “If it is a very long cash conversion cycle, it will increase their working capital costs.”
Shares of HAL gained as much as 13.7% in early to Rs 1,048— the highest since August. The stock is up for the second straight day. All the three analysts tracking the company recommend a ‘buy'. The stock is trading 12.6% higher than its Bloomberg consensus 12-month price target of Rs 885 apiece.
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