Hindustan Aeronautics (HAL) IPO Review, Should You Invest?

Hindustan Aeronautics Ltd. is ready to open Initial public offering (IPO) of 3,41,07,525 equity shares on Friday, 16^th March 2018. Retail investors and eligible employees will get discount of Rs. 25 per share. The price band of the Hindustan Aeronautics IPO is Rs.1215- Rs. 1240 per equity share. HAL IPO is proposed to be listed in NSE and BSE.

Hindustan Aeronautics Business Profile

Hindustan Aeronautics is a Bengaluru based company, established in year 1963. The company is engaged in manufacturing, design, development and servicing of aircraft, helicopters, avionics, aerospace structures etc.

HAL got status of the ‘Navratna’ company in year 2007. It is largest Defense public sector undertaking (DPSU) in terms of revenue.

Indian Defense force is the main customer of the company, which account for over 93% of sale. Other customers include- Indian air force, Indian Defense force, Government, corporate, Indian Army, Indian Navy etc.

Purpose and Key Dates Of HAL IPO

The Company is not going to get any proceed. And all proceeds from the offer will go to the selling shareholder (president of India).

However, the company will get benefit of listing in the stock exchange.

• Issue closing date: 20^th March, 2018
• Face value: Rs. 10
• Minimum lot: 12
• Net offer: 33,438,750 Equity Shares
• Employee reservation portion: 668,775 Equity Shares
• Finalization of basis of allotment: On or before 26^thmarch 2018
• Initiation of refunds: On or before 27^thmarch 2018
• Credit of equity shares: On or before 27^thmarch 2018
• Listing date: On or before 28^thmarch 2018

Strength Of The Company

• Great experience of over 5 decades in area of research, design, repair, manufacturing and maintenance services.
• Leading position in India in aeronautical industry.
• Strong financial record.
• Largest defense public sector undertaking in term of revenue.

Valuation Parameter

On financial front, from FY 2015 to FY 2017, we can see revenue/net profit for FY 2015 is Rs. 17362.00 cr. / Rs. 994.10 cr., for FY 2016 Rs. 18754.80 cr. / Rs. 2004.30 cr., for FY2017 Rs. 19596.90 cr. / RS. 2624.70 cr. and for  1HY 2018 5665.90 cr. / Rs.391 cr.

HAL has posted average EPS of Rs. 54 for last three fiscals. Profit after tax (PAT) margin for FY 15 is 6%, for FY16, 12% and for FY17 it is 14%.

There is no listed company which can be directly compared to the HAL business. Therefore, we cannot make any comparison.

Should You Invest in Hindustan Aeronautics IPO?

Expected listing gain of HAL IPO is around 20%. Recently, Tasty dairy specialties ltd. IPO day listing gain was 7.44% while its total profit above issue price was 11.78%. Sintercom India IPO day listing gain was 20% and its total profit above issue price was 8.46%.

HAL has strong financial record. Investors are getting good opportunity to invest in a defense sector PSU having leadership in aeronautics. So, considering its positive points and strong track record, investor may subscribe it for getting listing gain as well as for long term investment.