Indian Election Result Could Be Good for HAL

The Narendra Modi-led government that won the federal elections for another five-year term may be good news for government-owned defense manufacturer Bengaluru-based Hindustan Aeronautics Ltd (HAL, Chalet 128). The win is also expected to bring good tidings for Indian defense vendors and to small and medium entrepreneurs (Hall 4) awaiting big contracts as the country aggressively moves forward in its “Make in India” mode.

With the former home minister Rajnath Singh now stepping into defense—and border skirmishes a regular reality—procurement is likely to see a boost. A major project close to takeoff includes 111 naval helicopters to be built under a complicated $3 billion strategic partnership (SP) scheme. If it works according to plan, the contract could go to an Indian company along with a foreign OEM by mid-2020. The SP evaluates OEMs and Indian companies and then chooses the ones with the lowest pricing and those meeting qualitative requirements.

With Airbus and Lockheed Martin likely to be in the fray, HAL, with its established helicopter facility, could be a potential contender with the Kamov 226-T. AIN understands an Indian Navy team has already visited Russia to check out the Kamov naval version. In February, during the Aero India show in Bengaluru, Russian Helicopters signed MoUs with five Indian manufacturers for the production of assemblies and components for Ka-226Ts in India. While this order has been given to the HAL/Rostec joint venture for 200 helicopters, 60 of which will be in a flyaway condition, the naval project is likely to benefit. Indigenization of the Ka-226T “is a key project within the scope of the Make in India program,” said Victor Kladov, director for international cooperation and regional policy at state corporation Rostec.

HAL achieved a record turnover of $2.96 billion last year, a growth of 7.8 percent over the previous year. Its order book position stood at $8.71 billion on March 31, the end of its financial year. It has said, this year, it expects fresh orders for Light Combat Aircraft and Light Combat Helicopters (LCA/H). While 16 LCAs have been delivered to the air force as part of a plan to replace MiG-21s, there are numerous orders in the pipeline HAL will need to address on an urgent basis.

Rahul Gangal, a Montreal-based partner with Germany-based consultancy Roland Berger, feels that though HAL is “well placed,” it is time for the monolith to focus on its multifaceted portfolio and shed complexity. The company has a varied mix of legacy and Western models of aircraft and subsystems and also developmental projects. “The time has come to seriously address its export opportunities,” said Gangal. He added that while the government of India did not issue penalties for late deliveries, in the global market, on-time performance is essential. “The potential is immense as there is a gap in the international market for platforms coming from non-Western suppliers. HAL has a diverse product range and technical capability in that arena. It will need to jack up its marketing abilities too.”

Source: AIN

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