India's leading aerospace and defence manufacturer, Hindustan Aeronautics Limited (HAL), has achieved a significant operational milestone with the delivery of its second GE-404 engine for the TEJAS MK-1A program.

This development, coupled with the company's expanding manufacturing footprint and robust financial performance, positions HAL as a cornerstone of India's defence modernisation efforts.

The arrival of the second GE-404 engine marks a crucial step in overcoming the supply chain constraints that have previously hampered the TEJAS MK-1A program. HAL is scheduled to receive a total of 12 engines by the end of the current financial year, with deliveries accelerating to two engines per month following the resolution of earlier supply chain issues caused by delays from a South Korean component supplier.

This engine delivery timeline is critical for HAL's production plans, as the company has six TEJAS fighter jets awaiting engine installation. The engines are essential for the Indian Air Force's existing order of 83 TEJAS MK-1A aircraft, while a proposal for an additional 97 jets has received clearance from the Ministry of Defence and is in advanced stages of evaluation.

HAL's production capacity has been strategically expanded to meet growing demand. The company now operates three production lines: two in Bangalore with a combined capacity of 16 aircraft annually, and a newly established facility in Nashik contributing eight additional units per year, bringing total annual production capacity to 24 aircraft. This expansion represents a significant scaling up from HAL's initial production rate of eight fighters per year.

Beyond the TEJAS program, HAL has secured several major defence contracts that will substantially impact its revenue stream. The company expects to finalise a ₹2,000 crore deal for Dornier aircraft during the current fiscal year. More significantly, HAL has confirmed that the Defence Acquisition Council's approval for upgrading 84 Sukhoi-30 jets will translate into a ₹65,000 crore project spanning approximately five years.

The Light Combat Helicopter (LCH) 'Prachand' program represents another major revenue driver, with HAL set to deliver 156 Prachand helicopters valued at ₹62,700 crore. Production of these helicopters is scheduled to commence in March 2028, with an annual production rate of 30 units extending over five and a half to six years.

HAL's financial performance in the March 2025 quarter reflected both operational challenges and underlying strength. The company reported a net profit of ₹3,958 crore, down 7.8% year-on-year, while revenue declined 7.2% to ₹13,700 crore. However, the company maintained robust profitability with EBITDA of ₹5,292 crore and operating margins of 38.6%, demonstrating efficient cost management despite delivery delays.

HAL's order book trajectory illustrates the company's growth potential, with current orders valued at ₹1.89 lakh crore and a target of reaching ₹2.6 lakh crore by FY26. This represents approximately eight times the company's FY25 turnover, providing substantial revenue visibility for the coming years.

The company's expansion is supported by significant capital investment, with planned expenditure of ₹14,000-15,000 crore over the next five years. This includes investments in advanced manufacturing capabilities such as a 20,000-tonne isothermal press, a 50,000-tonne hydraulic press for engine and Aero-Structure forgings, and a carbon fibre facility.

HAL has maintained its commitment to shareholder returns, declaring a final dividend of ₹15 per equity share for FY25, representing a 300% payout based on face value. This follows an interim dividend of ₹25 per share announced in February, bringing the total dividend for FY25 to ₹40 per share. The record date for dividend eligibility has been set for August 21, 2025.

The government, holding a 71.64% stake in HAL, stands to receive approximately ₹718.6 crore from the final dividend distribution. This dividend payment reflects HAL's strong cash generation capabilities and confidence in future earnings potential.

HAL's manufacturing expansion extends beyond aircraft production to encompass a comprehensive aerospace ecosystem. The company has established partnerships with over 250 domestic companies, primarily MSMEs, to achieve indigenous content exceeding 65% in the LCH program. This approach aligns with India's Atmanirbhar Bharat initiative and is expected to generate over 8,500 direct and indirect jobs.

The TEJAS MK-1A program specifically targets enhanced operational capabilities through the integration of Advanced Electronically Scanned Array (AESA) radar, Electronic Warfare Suite (EWS), Beyond Visual Range (BVR) missiles, and air-to-air refuelling capabilities. These technological improvements position the aircraft as a modern multi-role fighter suitable for contemporary combat scenarios.

HAL's strategic positioning in India's defence sector, combined with its expanding production capabilities and substantial order book, establishes the company as a critical enabler of the country's defence modernisation objectives. The resolution of engine supply constraints, coupled with systematic capacity expansion and technological advancement, provides a foundation for sustained growth in the coming years.

IDN (With Agency Input)