CARE Ratings on March 5, 2024, reaffirmed ‘CARE AAA’ rating to HAL’s long-term bank facilities and ‘CARE A1+’ to its short-term bank facilities, factoring in its strategic importance to the government of India as its core defence aviation equipment supplier for the Indian defence forces. The central government owns majority ownership (71.64%) in the company despite divestment of part of its stake over the past two years.

The ratings also derived comfort from a strong order book, healthy operating performance, and the high-entry barrier in the business considering the capital intensity and long gestation period required for developing the manufacturing and servicing facilities.

The agency believes that HAL will continue to benefit from its strategic importance to the Indian defence forces resulting in maintaining its leadership position in the Indian aerospace and defence industry. Adding to it, the company’s long track record of operations and high entry barriers along with its highly comfortable financial risk profile also augur well for the PSU company.

HAL’s liquidity stood strong marked by free cash and cash equivalents of around ₹20,300 crore as on December 31, 2023. There has been negligible utilisation of its sanctioned fund-based working capital limits of ₹4,000 crore over the past 12 months ended December 31, 2023, as the working capital requirement is met out of internal accruals and advances from its customers, CARE said in its report.

The company reported cash flow from operations of ₹9,406 crore in FY23, while its cash accruals also remain healthy and are expected to comfortably meet its working capital and the routine capex requirements of ₹1,800-2,000 crore per annum, it added.

HAL does not have any term debt repayment obligations and has completed Phase-1 of capex at Tumakuru with a capacity of 30 helicopter units, while the second phase for increasing its capacity to 60 helicopters annually will be contingent upon order inflow.

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