Shares of Hindustan Aeronautics Limited (HAL) surged over 7% in early trading on April 1, 2025, after the company announced a landmark deal with the Ministry of Defence (MoD) for the supply of 156 Light Combat Helicopters (LCH), known as Prachand, valued at ₹62,700 crore (approximately $7.3 billion). This significant contract marks HAL's largest-ever procurement from the MoD, with 90 helicopters designated for the Indian Army and 66 for the Indian Air Force.
The contracts, signed on March 28, 2025, are expected to bolster HAL's order book, which has seen a remarkable increase to ₹1.84 lakh crore from ₹94,129 crore at the beginning of the fiscal year. The delivery of these helicopters is set to commence in the third year following the contract signing and will be spread over five years, as confirmed by HAL in a regulatory filing.
The Prachand helicopters are uniquely capable of operating at high altitudes, making them suitable for deployment in challenging terrains such as the Siachen glacier and Eastern Ladakh. Equipped to fire both air-to-ground and air-to-air missiles, these helicopters feature advanced data chips that facilitate network-centric operations, enhancing their combat capabilities.
HAL's impressive financial performance for the quarter ending December 2024 further underscores the company's growth trajectory. The aerospace giant reported a net profit of ₹1,432.60 crore, reflecting a 14.28% increase from ₹1,253.51 crore during the same period last year. Revenue from operations also rose by 15%, reaching ₹6,956.93 crore.
In the wake of the contract announcement, analysts have expressed optimism regarding HAL's stock. Global brokerage firm UBS raised its price target for HAL shares from ₹4,800 to ₹5,440, indicating a potential upside of 30.26% from the previous close of ₹4,176. The brokerage noted that the awarding of the contract was a positive surprise, as they had anticipated the order value to be around ₹45,000 crore and expected it to be awarded in the first quarter of FY26.
UBS analysts highlighted that the recent acceleration in defence procurement decision-making by the government is a key positive for HAL. They anticipate FY26 will be a turning point for defence ordering, as the pace of decision-making has significantly increased.
JP Morgan also weighed in, maintaining an "Overweight" rating on HAL with a price target of ₹4,958. They noted that the finalization of this massive order strengthens HAL's growth opportunities, especially considering that the company has secured orders worth approximately ₹56,000 crore during the first nine months of FY25. With the latest contract, HAL's estimated total order inflow for FY25 surpasses ₹1.2 lakh crore.
HAL's stock has been a standout performer, particularly during March 2025, where it recorded a remarkable 35% gain, making it the best-performing stock on the Nifty PSE index for the month. As of April 1, 2025, HAL shares were trading at ₹4,440, reflecting a 6.32% increase from the previous day.
In addition to the helicopter contracts, HAL has been expanding its production capabilities. The company recently received the first of nearly 100 F404-IN20 engines from GE Aerospace for the Tejas Light Combat Aircraft Mk-1A variant, marking a significant milestone after years of delays.
HAL's commitment to enhancing its domestic manufacturing capabilities is evident, as the LCH Prachand is expected to have 65% indigenous content, further strengthening India's defence manufacturing ecosystem. This aligns with the government's "Make in India" initiative, which aims to boost local production of defence equipment.
During FY25, HAL secured new manufacturing contracts valued at ₹1,02,000 crore, alongside ₹17,500 crore in repair, overhaul, and maintenance (ROH) contracts. This robust order book positions HAL for continued growth as it navigates the evolving landscape of the defence sector.
Despite some challenges in deliveries due to engine availability and other factors, HAL's management remains optimistic. Dr. D K Sunil, CMD of HAL, stated, "This achievement was despite the shortfall in deliveries of Light Combat Aircraft (LCA) and Advanced Light Helicopter (ALH). However, the deliveries of other products and services were accelerated, which helped us to maintain the top line."
As the Indian government continues to prioritize defence spending, HAL is poised to capitalize on the growing demand for indigenous defence solutions. With a strengthened order book and a commitment to expanding production capabilities, HAL is well-positioned for a successful fiscal year ahead.
In summary, the recent contracts for the Prachand helicopters not only bolster HAL's financial standing but also enhance its role in India's defence landscape. As the company prepares for the future, analysts and investors alike are watching closely, anticipating further growth and success in the coming years.
