State-owned defence major Hindustan Aeronautics Ltd (HAL) on Thursday said it has sought government approval to come out with a public issue to raise funds for new projects and modernisation of the organisation.

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“Its (aerospace and defence) a strategic industry and the decision for raising funds from the market would depend entirely on the ministry’s (Ministry of Defence) nod. However, going forward, we would need to mobilise funds for new projects and modernisation that would require installation of new infrastructure, technology, and hiring skilled people,” said D Shivamurti, finance director, HAL.

The HAL finance head did not specify the timing, size of the issue, valuation or the extent of stake dilution by the government.

The aerospace and defence public sector unit is currently wholly owned by the government.

Shivamurti said HAL had plans to invest close to Rs20,000 crore over the next 10 years to execute its order book valued at Rs1 lakh crore.

He said presently the company is funding most of its projects through private firms by forming public private partnerships (PPPs).

“We have 10 joint ventures (JVs), where private companies like Tata, InfotechEnterprise and others have brought in equity, some even up to 50%. Of the 10 JVs, three are Indian and seven foreign, where investment of our partners can be only up to 26% due to the FDI (foreign direct investment) cap in the defence sector,” said Shivamurti.

However, now with its bulging order book there is a need for the state-run aerospace firm to expand capacity to execute orders. This, Shivamurti said, made it imperative for it to approach the market.

Today, HAL has zero debt on its books and is self sufficient in terms of funding.

“Though we have about Rs9,000 crore in reserves and excellent credit rating to borrow from the debt market, we feel it’s time to tap the public for raising additional funds to meet our present and future investment requirements,” Shivamurti added.