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Hindustan Aeronautics Limited begins IPO process
October 16, 2017
A Hindustan Aeronautics Limited (HAL) Tejas lightweight multi-role fighter. Photo credit: Government of India

Hindustan Aeronautics Limited begins IPO process

Hindustan Aeronautics Limited (HAL) has begun the process of launching an initial public offering (IPO) in which 10% of the company will be available to stock-exchange investors.

HAL announced that it filed a Draft Red Herring Prospectus (DRHP) on September 29 with the Securities and Exchange Board of India (SEBI). The IPO represents a partial divestment from the Government of India in the state-owned public-sector undertaking (PSU).

“This is a major milestone towards the listing of the defence PSU which is slated for partial disinvestment by the government of India,” stated HAL Chairman and Managing Director T. Suvarna Raju.

Notes & Comments:

Divestment will enable the Indian government to raise money by selling 10% of HAL’s shares, the sale of which will provide the Indian private sector an avenue to engage with PSUs. Until recently, India’s defence PSUs had played the central role in managing defence research and development (R&D) and production.

However, under the stewardship of Prime Minister Narendra Modi’s government, momentum for defence procurement is being shifted to the Indian private sector. The first major example of this had occurred in 2016 with India’s purchase of Dassault Rafale fighters. Under the framework of its offset commitments, Dassault partnered with Reliance Group, a major private-sector conglomerate, to implement workshare for the deal in India (using a new 100-acre plant at Nagpur jointly built by Reliance and Dassault).

Originally, HAL was supposed to implement the Rafale program. However, this would have happened via the Medium Multi-Role Combat Aircraft bid, which was scrapped due to cost. New Delhi passed HAL over the off-the-shelf purchase as well. The next major fighter import, which is for a new single-engine fighter, will also skip HAL. This fighter bid will be implemented under the Strategic Partnership framework, which will see original equipment manufacturers partner with Indian private sector companies to execute armed forces programs. New Delhi aims for at least 70% of program sourcing to be done domestically.

It would be premature to assert that PSU privatization is on the horizon, but public-private ownership may impact other PSUs over the long-term. This could help facilitate a measure of external accountability over the efficiency and practices of PSUs, enabling them to better compete with the private sector and (albeit in partial ownership) support the public exchequer. However, this is theoretical, it would need to be seen in practice in the coming years.

  • Lasit

    the big indian white elephant is for sale. hope this makes some positive changes to the organization and its internal culture.

    • pinku pradhan

      White elephants are very rare and only kings can afford to own one. Thank you for calling HAL a white elephant. The products line up of HAL is mind boggling and it’s order book is filled up for the next 10 years. Once listed I believe it will surpass the market valuation of Reliance industries Ltd. It’s products are ALH ( 300 in order book), LUH ( 600 in order book), LCA Tejas ( 200 confirmed and will increase as exports start ), will built 200 ka 226 in colaboration with Russia, HAL Rudra and HAL light combat helicopter are produced in large numbers and Govt of india has given a free hand to the defence forces to order as many helicopter as they want of these two types. Apart from its own products it also produce the Jaguar, sukhoi, Cheeta helicopter and many other products under licence. Companies like Boeing and Airbus does not have such order books as HAL has. Many of the production lines of these multinationals are incurring loss year after year. It is only a very wrong perception has been created about the public sector undertakings. In india out of the top 10 companies, 6 are public sector govt companies which are ONGC, CIL, IOCL, SBI, HPCL, BPCL. There are such huge govt organisation in India if listed in the stock exchange will dwarf the biggest companies in the world such as LIC, PPF ( the deposits held by it is in excess of $150 billion) , India post ( it’s assets are in excess of $ 1000 billion and it has a branch network of 154882 all over the country), BSNL has the longest fibre optic network in india and all the private telecom companies depend on BSNL fibre optic network for data and voice transfer. This misconception has been created by the private sector companies who are not able to build such companies and want to capture these govt companies when they will be privatised after creating such misconception in the mind of the public and in the mind of the policy makers. It is now a days observed that the business houses have regularly making statements that they are interested in purchasing the govt companies when they will be privatised and are building cash reserve in that regard. It means that the public sector companies have value and for that only the business houses are interested. The question also arises as to why the business houses are only interested to purchase the Govt companies and not the private companies. There are many companies in india which are NPA and sick in all sectors such steel, power etcs. Employment generated by the Govt companies is also huge as compared to the private sector. For example Airtel has a market share of 24 percent and employ 25000 people where as BSNL with a market share of just 9 percent employs 210000 employees almost 9 times of airtel.

      I am of the view that if the public sector companies are run properly, the earning from the same will be sufficient to run the country without imposing any form of tax on the general public.

  • Saptarshi Dasgupta

    Modi is a mastermind. People might criticise him for his and his party’s headliner stand but in 3-4 years he has worked for India. Going to countries , cementing relations, helping private industries and implementing make in India to compete with China , making strong political connections with global leaders, taking hard decisions and declaring war on corruption. It is a privilege to have a person like him as PM. For India he is good . The government companies all delayed projects like Tejas ,Arjun and many more. Now with private sector push and almost all majors tying up with foreign giants for example Tata with Lockheed , Adani and Saab, Daasault and Saab , Mahindra and bae, l&T and IAI and many more this is exciting times for Indian defence. Only negative point in Modi government is that it is filed with Hindu hard liners and as we have seen in Pakistan , hard liners are bad for development.

  • Randian Tv

    Would HAL be able to receive technology to produce 4th generation air crafts after its privatisation ?

    • Saptarshi Dasgupta

      brother HAL already produces 4th gen technology. Its association with Israel , France and Russia has already made it capable. It just needs AESA, powerplant technology and stealth technology. India has come a long way. Today India has produced nuclear submarines , stealth warships, ballistic missile defence systems , bullet proof jackets and ballistic helmet and futures soldier stuff through privatization…in coming times we would get better technology no doubt.

      • Milind Naik

        Yes, you are right.
        Tejas fighter they say is 4.5 generation aircraft, Tejas fuselage already utilised carbon fibre & titanium parts to achieve stealth capabilities. HAL seems to be looking after enhancement of Kaveri jet engines to be at par with western jet engines also HAL wants altar modern production line to built 4 Tejas per month to fulfill IAF requirements in time.

    • MT

      They are certainly doing with help of dozen drdo labs.
      They suffer with manufacturing mediocrity and theur product is bit crude but aim is to gradually bring competitive ness with Pvt section involvement

      HAL filed 730 patents in 2015

      • ahmria

        To be fare I think Hal and DRDO should be privatised as then both entities would be forced to improve their products quality wise and also their organisational efficiency and management. Right now both organisations have India over a barrel by making very expensive and usually substandard equipment compared to international rival products. Projects are also allowed to run over budget and deadlines.

    • Jack More

      Look interestingly My comment deleted but not yours because you are from pure land.

      • Abdul Rashid

        Jack, there are some spam filters set up to pick out commonly used South Asian and other offensive words.

        • Charles Bronson

          As a moderator you claim “spam filters set up to pick out commonly used South Asian offensive words”. Good grief !!!
          Yet “Randian TV” somehow clears the spam filters of QUWA- a pakistani website. I guess not much to be surprised there.
          Don’t get me wrong. I am neither offended nor do i care what pakistanis have to say about India or vice versa. Personally i like to put my bets on ‘hard facts’ and the facts at present point to the stark difference in defense capabilities between the two developing S.Asian countries. That to me speaks louder than any ad hominem attacks, personal jibes or the use of derogatory words against either country on this forum.
          However what worries me here are the double standards of a so called moderator like you who swears by words like unbiased and impartial approach in running this forum. I wonder would a person like Mr. Abdul Rashid stand quietly if someone put up a really offensive profile name directly condescending Pakistan on QUWA?
          Would he still say “The spam filter look at the content of the comment not the name.”?
          Again i won’t be surprised if this comment doesn’t get published here. Honestly i don’t even care. But nonetheless i am sure the person to whom this message is targeted, would have already read it before discarding.

          • Abdul Rashid

            There you go Charles, your comment has been approved. It was on defence topic and contained no offensive content. Again, the spam filter looks at the content not the name. We read all comments and make a decision accordingly. Quwa is not my website though I’m one of the moderators here. Quwa publishes Indian defence related articles objectively without any bias and we welcome comments from all sides. We have a ”trusted” list of guys whose comments are passed without awaiting moderator approval. We don’t have many on the list but iit does include Indian too. Regarding the display name, yes it’s unfortunate and not something we wish to see. The decision to start including the names on the spam filter is not mine. However, I would request all posters here to be sensitive to others and to post any content in keeping with Quwa guidelines.

          • Jack More

            Funny..If this looks at the content,My comment would also get deleted.

  • Rizwan

    From the Pakistani perspective, there is a lot about India not to like, but we could learn something from them about privatization. This is how it should be done, by selling shares to the public. In Pakistan we sell, or try to sell, the whole thing to cronies for pennies on the dollar and the officials in charge have their pockets lined generously by the buyers.

    • Steve

      If you compare Modi to NS, there is no contest. We have had a huge problem with quality, honesty, and sincerity of all elected leaders unfortunately. Everything stems from that, and it is the root of our problems.

  • SP

    Whatever we may say about Modi, the fact is that he is laying a strong foundation for India’s economic growth and development by documenting the economy and reforms. Unless Pakistan gets its act together we will continue to lag further behind and the only country that can help us is China.

    Pakistan needs reformers and not status quo figures. Our establishment should be busy thinking about our economy and reforms agenda rather than playing internal politics.

  • Milind Naik

    Great futuristic decision …

  • Abdul Rashid

    The choice of display name where offensive to others is unfortunate. The spam filter look at the content of the comment not the name. You can click the link at end of each article to read Quwa commenting policy. These rules are applied equally to everyone. You can choose not to engage those who you find offensive.

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