HAL hits new high on stock split plan; zooms over 700% from March 2020 lows

Shares of Hindustan Aeronautics (HAL) rose 3 per cent to hit a new high of Rs 3,630 on the BSE in Friday’s intra-day trade after the company said it will consider a stock split. The board of directors of the state-owned defence company will meet on June 27 to mull the proposal of stock split of equity shares of face value of Rs 10 each.

“The meeting of the board of directors of the company is scheduled on Tuesday, the June 27, 2023, to consider, inter-alia, a proposal of sub-division of equity shares of the Company,” HAL said in an exchange filing.

A stock split is a corporate action, in which a company issues additional shares to shareholders, increasing the total shares by the specified ratio based on the shares they held previously. Companies often choose to split their stock to lower its trading price to a more comfortable range for most investors and to increase the liquidity of trading in its shares.

In the past one month, the stock price of HAL has rallied 22 per cent as compared to a 1.7 per cent rise in the S&P BSE Sensex. In the past one year, it has zoomed 90 per cent as against a 13.5 per cent gain in the benchmark index. Further, the market price of HAL skyrocketed 710 per cent from its March 2020 low of Rs 448 on the BSE, the exchange data shows.

The principal business of HAL is to undertake design, development, manufacturing, maintenance, repair, overhaul, and servicing of products like aircraft, helicopters, engines and other related systems like avionics, instruments, and accessories.

It also engages with the Indian Space Research Organisation (ISRO) to contribute to the space programmes of the country. The GoI remains HAL's largest shareholder, with a current shareholding of around 75 per cent.

Its primary consumers are the Indian Defence Forces comprising the Indian Air Force, Indian Army, Indian Navy, along with the Indian Coast Guard.

The order book of HAL stood at around Rs 82,000 crore at the end of March 2023, providing high revenue visibility in the medium to long term, while indicating HAL’s strong competitive and strategic positioning. During the year, fresh contracts of around Rs 26,000 crore were received, which includes manufacturing contracts for 70 HTT -40, 6 Do-228 Aircraft and PSL V launch vehicles.

The Government of India’s (GoI) increased focus on indigenisation with the Make in India policy and mandatory offset policy for defence procurement by GoI, augur well for the company’s future growth.

ICRA in a recent HAL’s rating rationale notes that the company also has significant contingent liabilities, primarily relating to sales tax demands from various states, aggregating to Rs 1,558 crore as on March 31, 2022. Any crystallisation of these liabilities or significant future outflows in terms of buy-back of shares/dividends, that can adversely impact its liquidity, remains a key monitorable.

The stable outlook on the AAA rating reflects ICRA’s opinion that HAL will continue to benefit from its strategic importance to the Indian defence forces, strong financial flexibility, high entry barriers and long track record of operations.

At 10:59 am; HAL was quoting 1 per cent higher at Rs 3,560, as compared to 0.15 per cent decline in the S&P BSE Sensex. A combined 2.1 million equity shares changed hands on the NSE and BSE.