Public sector firm Hindustan Aeronautics' Rs 4,230-crore initial public offer (IPO) hit the market today. The government is divesting its 10.20 per cent holding via the IPO. The government approved the sale of 10 percent stake in the defence public sector undertaking on October 1 last year.
Here are five things to know about the offer.
1. The company will also sell 10.20 per cent of its equity through an offer-for-sale route through the IPO and has fixed a price band of Rs 1,215-1,240 a share for the offer that will close on March 20.
2. The Navratna company clocked a profit of Rs 3,580 crore in fiscal 2017 on a revenue of over Rs 18,600 crore. HAL has an order book of over Rs 68,000 crore, which covers the next three years. The issue is being managed by SBI Caps and Axis Capital.
3. It is offering a discount of Rs 25 on offer price to retail individual bidders, and employees which have come in for at least 12 or the multiples of 12 shares.
4. Around 34,107,525 shares are on sale through an offer-for-sale by the President, acting through the department of defence production. The offer comprises a net offer of 33,438,750 equity shares and an employee reservation of up to 668,775 shares.
5. Bengaluru-based HAL is primarily involved in the operations of the aerospace industry. These include manufacturing and assembly of aircraft, navigation and related communication equipment and airports operation. HAL designs, develops, manufactures, sells, repairs, and overhauls aircraft and related systems in India. It offers helicopters and power plants; aerospace structures, tanks, and cryogenic engines; and materials, including castings, general forgings, precision forgings, powder metallurgy products, rubber products, composites, and rolled rings. The company also exports its products. It serves space, defence, and civil markets.
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HAL derives 93% of sales from Indian Defence Services and export its products and services, primarily spares to more than 13 countries. HAL's Revenue and PAT registered CAGR of 7% and 62% respectively over FY15-17. HAL's focus on reduced dependence on defence products by increasing contribution from the civil aircraft and helicopter segments bodes well. HAL has received requests for proposal (RFP) in December 2017 for 83 LCA Mk1A aircraft of Rs 60,000 crore and 15 LCH Rs 4500 crore. Given strong balance sheet, robust order book and execution capabilities, we are constructive on HAL long term prospect. At an upper price band of Rs 1,240, HAL is available at a reasonable valuation of 16x on FY17 EPS. As Indian defence industry is poised for growth, we recommend 'Subscribe' to the issue, with a long term perspective.