HAL awaits government nod to go public soon

India’s defense behemoth Hindustan Aeronautics Ltd (HAL) is awaiting the government’s green signal to go public soon to raise funds and improve its corporate governance, an official said Thursday.

“Being a fully owned state-run enterprise, it is for the government to decide when to begin the disinvestment process and the quantum of dilution,” HAL finance director D. Shivamurti told reporters.

Though other state-run defense firms such as Bharat Electronics Ltd (BEL) and Bharat Earth Movers Ltd (BEML) had gone public long ago, the government had been wary of diluting its 100 percent equity holding in the strategic HAL, a sole manufacturer of military aircraft and aerospace systems for the Indian armed forces. “The process of making an initial public offer (IPO) is on for various reasons, including meeting corporate governance objectives, making public stakeholders and have financial muscle to meet our future requirements for scaling our strategic operations,” Shivamurti said on the sidelines of Aero India 2011.

Once the government approves divesting in the open market, the 70-year old company board will decide the quantum, value and the timing of the issue. “We will be investing about INR 20,000 crore (INR 200 billion) over the next 10 years to modernize and expand our capacity to execute orders valued at INR 100,000 crore (INR 1 trillion). We plan to raise funds internally (about INR 1,500 crore) and from the market through a combination of equity and debt instruments than depend on the government for capital investments,” Shivamurti said.

As a global player in the aerospace industry, the INR 11,500-crore HAL makes various types of fixed wing aircraft under licensed production, rotary wing choppers and sub-systems primarily for the Indian Air Force (IAF), army and navy and Coast Guard.

“Though we have about INR 9,000 crore in reserves and excellent credit rating to borrow in 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.

The company has projected a turnover of Rs.12,600 crore for this fiscal (2010-11).