HAL's revenue skyrockets, but original design, IP vital for global leadership

Defence Public Sector Undertaking (DPSU) Hindustan Aeronautics Ltd (HAL) just declared a record revenue of Rs29,810 crore for FY 2023-24. This amounts to 11 per cent growth in revenues compared to 9 per cent during the previous financial year. HAL also received fresh manufacturing contracts of over Rs19,000 crore and repair and overhaul contracts worth Rs16,000. This is an outstanding performance considering the major supply chain challenges throughout the year due to the global political situation. Meanwhile, India’s defence exports cross the Rs21,000-crore mark for the first time.

Also, the series production variant of LCA ‘Tejas’ Mk 1A, tail number LA5033, piloted by Chief Test Pilot Group Captain (retd) KK Venugopal, made its first flight on 28 March and is getting all set for handover to Indian Air Force (IAF) later in April. Meanwhile, India just delivered two HAL-built Dorniers to Guyana and began a new partnership. HAL has clearly come a long way since it was first established as an aircraft factory by the visionary patriot and pioneering industrialist Seth Walchand Hirachand Doshi in 1940.

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Initial years of Hindustan Aircraft

Hindustan Aircraft was started in Bangalore in the Mysore state with the active support of its Diwan, Mirza Ismail in December 1940. The Kingdom of Mysore was a venture partner. There were also others who invested their money. As early as 1942 Hindustan Aircraft was licensed producing Harlow PC-5, Curtiss P-36 Hawk and Vultee A-31 Vengeance for the IAF. By April 1941, the Indian government acquired one-third of ownership and by April 1942, it nationalised the company by compensating shareholders adequately. Nationalising was prompted by the World War II. In 1957, the company started manufacturing Bristol Siddeley Orpheus jet engines under licence at the new factory located in Bangalore.

The IAF Aircraft Manufacturing Depot in Kanpur, which was manufacturing HS748 under license at that time, along with the newly established group tasked with MiG-21 production under license and its planned factories in Koraput, Nasik, and Hyderabad, were amalgamated to establish HAL as a DPSU. Hindustan Aircraft was renamed as Hindustan Aeronautics Ltd later on 1 October, 1964. The HAL HF-24 Marut fighter bomber was the first indigenous fighter aircraft made in India. It had a world-class airframe design, but could not fully succeed because it lacked a matching powerful engine. Yet 141 were built and saw significant service in the IAF including during the 1971 war.

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Hindustan Aeronautics Ltd today

HAL is today a major aerospace and defence PSU with headquarters in Bengaluru. HAL currently has 11 dedicated Research and development (R&D) centres and 21 manufacturing divisions under 4 production units spread across India. HAL is managed by a board of directors and works under the direction of India’s Ministry of Defence. They are involved in designing and manufacturing fighter jets, helicopters, jet engines and marine gas turbine engines, avionics, software development, spares supply, overhauling and upgrading of Indian military aircraft.

Operating revenues and financial status

The company has nearly 24,500 employees. Its provisional and unaudited revenue from operations exceeding Rs 29,810 crore ($3.75 billion) for the financial year 2023-24 and registered a double-digit growth of around 11 per cent.

Operating income has increased to Rs6,509.50 crore ($820 million). The net income has increased to Rs5,827.73 crore ($730 million). HAL’s total assets are now worth Rs67,203.80 crore ($8.4 billion). Of HAL’s total equity of Rs23,575.89 crore ($3.0 billion), 71.65 per cent is held by the Government of India. HAL’s shares currently trades at Rs3,548 and it saw an increase of nearly 150 per cent last year.

As of 31 March, 2024, the company order book stands more than Rs94,000 crore. HAL expects many more orders in FY 2024-25, announced HAL chairman CB Ananthakrishnan. The company has maintained the growth momentum and has achieved an improved performance.

More than 40 per cent of HAL’s revenues come from international deals to manufacture aircraft engines, spare parts, and other aircraft materials.

LCA ‘Tejas’ orders

IAF had initially ordered 40 LCA Mk-1, out of which 32 fighters were delivered and two squadrons of these are already flying and operational. Eight Mk-1 two-seaters are in the process of being delivered. IAF ordered 83 LCA Mk-1A jets (including 10 two-seat) for Rs48,000 crore in February 2021. IAF has already announced intentions to buy 97 more Mk-1As at a cost of around Rs67,000 crore. The first aircraft was to be delivered to IAF by 31 March but some key certifications will be completed in a month.

In October 2023, HAL handed over the first LCA Mk-1 two-seat variant to the IAF chief Air Chief Marshal VR Chaudhari in Bangalore. With eight LCA Mk1 two-seat aircraft and nearly 10 ordered for Mk-1A variants, the twin-seat aircraft are set to fill a key operational and training role in the IAF.

LCA Mk-1A is expected to give a significant operational boost to the IAF. Meanwhile, based on projected performance, IAF has already indicated the initial requirement of nearly 200 LCA Mk-2. This figure is bound to increase when the aircraft begins to fly. Last year, HAL and US engine maker General Electric signed a MoU for transfer and technology (ToT) and manufacturing of GE-414 aero-engines in India for Tejas Mk-2 aircraft. A total of 80 per cent ToT has reportedly been agreed upon, and if it does take place, it should significantly transform the aero-engine manufacturing ecosystem, and promote a level of self-reliance. Meanwhile, HAL keeps looking for opportunities to collaborate and develop newer technologies through joint ventures and alliances with friendly global and Indian technology partners.

Helicopters

For long HAL made the Alouette and Lama helicopter variants under license. The Advanced Light Helicopter (ALH) ‘Dhruv’ has been a great success story for HAL. After the first flight in 1992, the helicopter was inducted into the Indian armed forces in 2002. To date, over 400 have been built, including a few exported to foreign customers. The armed variant ‘Rudra’, the Light Combat Helicopter (LCH) ‘Prachand’ and Light Utility Helicopter (LUH) have been ordered in significant numbers. The ALH variants are also being operated by many civil operators.

HAL is now developing the Indian Multi-Role Helicopter (IMRH), a medium-lift helicopter to replace the Mi-8/17 helicopters. The first flight is targeted in 2025–26. HAL also formed a joint venture, the SAFHAL Helicopter Engines Pvt Ltd with French firm Safran Helicopter Engines for indigenous design and development of chopper engines.

Trainer aircraft

HAL had successfully built in the past trainer aircraft like the HT-2, HPT-32 and Kiran. For now, 106 of the under-production HTT-40 Basic training aircraft, have been ordered by the IAF. They look promising. But the HJT-36 ‘Sitara’ Intermediate jet trainer has still to see the desired success and this reflects poorly on our capabilities.

Other domestic aerospace tasks

HAL built the Folland Gnat, the Ajeet, the MiG-21s, Jaguars and MiG-27 aircraft, HS-748, among others. HAL built nearly 220 Sukhoi Su-30MKI. They will now be involved in its upgrade. It also be carrying out the overhauls. HAL upgraded the SEPECAT Jaguar fleet and the MiG-29s. It licensed production of 82 BAE Hawk 132. HAL built over 125 Dornier 228 aircraft for the Indian armed forces and some foreign customers. HAL will be the production partner for DRDO’s Advanced Medium Combat Aircraft (AMCA).

HAL supplies ISRO, the integrated L-40 stages for GSLV Mk II, propellant tanks and feed lines of PSLV, GSLV MKII and GSLV MKIII launch vehicles and structures of various satellites.

HAL’s international major orders

HAL has also obtained several multimillion-dollar contracts from leading international aerospace firms such as Airbus, Boeing and Honeywell to manufacture aircraft spare parts and engines. It will manufacture Dornier 228 for RUAG of Switzerland. Export composite materials to Israel Aerospace Industries. Produce Honeywell TPE331 engines. HAL got a contract to supply avionics for the Malaysian Su-30MKM. A contract to supply the ambulance version of HAL Dhruv to Peru and a few HAL Dhruv helicopters for Turkey and Mauritius. HAL has an unmanned helicopter development project with Israel Aerospace Industries. HAL will supply steel and nickel alloy forgings to GE Aviation for its global military and commercial engine programmes.

Way ahead: Need to do much more

HAL, the flagship aircraft builder of the country must succeed so that, it can meet the aircraft requirements of the fourth largest armed forces in the world and the huge demand from the civil sector. HAL is currently ranked 42nd globally among defence manufacturers. India must one day get to within the first ten. China already has two companies there.

HAL has been a great license manufacturing company but has not invested sufficiently in original design and building intellectual property. Also often there are production quality issues. It must also come out of the socialistic structure and culture and imbibe realistic corporate methods for hiring and firing the workforce. There is a need to get result-oriented well-paid CEOs. HAL must start competing more beyond the assured Indian armed forces orders.

India still has a long way to go on indigenous transport aircraft, airliners, and large unmanned aerial vehicles. As the future is unmanned, HAL’s manned unmanned teaming programme called Combat Air Teaming System (CATS) needs to be hastened. India has license-produced and overhauled a large variety of aero engines but has failed to design and produce an aero engine of its own. The aero-engine development requires a task-force-like approach. It is most important if India has to become a global player.

Meanwhile, given the Make in India policy and to increase the share of defence exports to achieve the target of $5 billion by 2025, HAL is planning to set up logistic bases in Indonesia, Malaysia, Sri Lanka and Vietnam with a priority target for Southeast Asia, West Asia and North African markets. It would not only help to promote HAL products but also act as a service centre for Soviet/Russian-origin equipment.

There is a need to understand the difference between Make in India and self-reliance. The goal is self-reliance and there are challenges to overcome. One cannot develop everything. Products to work on have to be identified and prioritised. This has to be done keeping risk and return on investment (RoI) in mind. This requires market understanding. There will be large capital requirements and the regulatory framework needs to be put in place. There is a need to prepare for a long gestation period. Skilled manpower will be required.

There is an urgent requirement for a publicly articulated National Security Strategy (NSS). From the NSS must flow the National Defence Strategy (NDS), National Defence Science & Technology Strategy (NDSTS) and National Defence Industrial Strategy (NDIS). This is essential to ensure a whole of government approach to issues.

Procurement processes must be fine-tuned to ensure that there is value created for shareholders of private industry. A non-lapsable national defence fund would enhance the confidence of the private sector in government intentions. This fund must also be used to fund R&D which may be projects spanning multiple years.

Collaborative partnerships between DRDO, DPSUs and Indian private companies and between Indian companies and global aerospace majors must be encouraged. There is a significant push for sharing public infrastructure, especially testing infrastructure, with private companies. This needs to be expanded. There is a need to expand the market beyond the armed forces to paramilitary, civilian areas and of course, for export.

Private industry must be continually educated, encouraged and supported to understand, accept and adapt to the distinctly different nature of innovation, research, development, manufacturing, maintenance and sustainment of military products. India has done it. It can do it. It has to be a whole-nation approach. The time to get going is now, lest we get left behind.

The writer is Director General, Centre for Air Power Studies. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views.