Which Companies Manufacture Defence Aircraft in India?

If you ask any Indian investor to name their favourite sectors in the stock market, defence would be on almost everyone's list.

And for good reason.

India's defence sector is on fire due to the government's insistence on self-reliance. Recently, it was announced that India's defence exports reached a phenomenal Rs 210.8 bn in FY24.

This number would have been unthinkable a few years ago. India has achieved this significant success by bolstering its domestic production of defence equipment. The increased capacity has undoubtedly strengthened national security.

The companies involved in defence production have thrived in this environment. Their stock prices have followed suit.

Among the companies in this exciting sector are those that engage in the manufacture of aircrafts.

Yes, Indian firms are building world class aircraft. In fact, there exists a full-fledged aerospace ecosystem in India. This comprises of not only the aircraft manufacturers, but also several vendors, including start-ups.

This is an interesting opportunity for investors in the stock market. Military aviation is extremely complex in terms of technology, processes, certifications, etc. And there is the national security angle to it as well. But if investors can crack this sector, potential riches await.

In this editorial, we will cover aircraft manufacturers, along with their suppliers, in India.

#1 HAL

It's obvious that we would start with Hindustan Aeronautics Ltd (HAL).

It's the premier aircraft manufacturer in the country. It's owned by the government of India. Established on 23 December 1940, HAL is one of the oldest and largest aerospace and defence companies in the world.

The company develops, designs, manufactures, and supplies aircraft, helicopters, avionics, and communications equipment for military and civil markets.

It domestically manufactures aircraft - Tejas light combat aircraft, Hawk advanced jet trainer, Su-30 MKI, HJT-36 intermediate jet trainer, Dornier DO-228 multi-purpose light transport aircraft, and the HTT-40 basic flight trainer.

It is aggressively pursuing exports by leveraging its range of indigenous products, particularly highlighting the capabilities and safety of platforms like LCA Tejas.

The company's focus on upgrading various aircraft for defence customers is another ace up its sleeve. This includes changes like giving planes a tech makeover, which is called an avionics upgrade and integrating new weapon systems. This expertise is expected to be a key driver in the company's success story moving forward.

As a continuation of its focus on expansion, the company is looking for partners from around the world and even opening up export offices in specific places.

A recent example of this is the company's partnership with Airbus to create a maintenance, repair, and overhaul (MRO) facility for the A320 family of aircraft in New Delhi. HAL's plan is to make an MRO hub in New Delhi which offers one stop solution for commercial airlines.

This is a big deal because this partnership will boost the Make in India initiative and will make India more self-reliant in repairing and maintaining aeroplanes.

HAL has signed memorandum of understanding (MOU) with other companies too.

For example, it has tied up with Israel Aerospace Industries to convert civil aircraft to multi-mission tanker aircraft. It also has a partnership with Safran, a French company which manufactures aircraft engines, to set up a development, sales, and support ecosystem in India for helicopter engines.

For more details, check out HAL's fact sheet and quarterly results.

#2 Bharat Electronics

Established in 1954 in association with CSF France, Bharat Electronics (BEL) is a government owned aerospace and defence company.

Bharat Electronics' product portfolio is broadly classified into defence & non-defence. The defence equipment it makes includes a slew of products such as missiles, avionics, radars, aircraft sensors, sonars, electronic warfare systems, and more.

BEL's electronics are integrated into various Indian-made defence platforms like fighter jets, warships, submarines, and communication networks. The company is an integral part of India's aerospace ecosystem. It manufactures critical data links and electronic warfare equipment for aircraft.

BEL's consistent investment towards R&D has helped create a strong competitive moat by enabling it to develop the latest generation products and services and gradually increasing the indigenisation of its product offerings, this will further help the company gain international market share.

The company has recently increased its emphasis on cutting-edge technologies like electro-optics and photonics. Its portfolio of night vision devices, optronic systems, and laser-based equipment demonstrates excellent domain knowledge and expertise.

Apart from catering to the domestic market, it exports its products to several countries, including Indonesia, Sri Lanka, Russia, the US, and South Africa.

For more details, check out Bharat Electronics' fact sheet and quarterly results.

#3 Azad Engineering

Recently listed Azad Engineering has made a mark on the Indian aviation segment.

The Hyderabad based firm has proven capabilities in developing advanced components for aircraft engines. The engine is the heart of any aircraft. So, the specifications for each component that go into its production are critical.

The company has recently tied-up with Rolls-Royce Plc for manufacturing and supplying complex components for its defence aircraft engines.

As reported in the media, with this strategic partnership, Azad Engineering will join the global supply chain for complex category components for Rolls-Royce's technologically advanced aero engines.

Major global defence firms are setting up their bases in India to take advantage of the country's Make in India initiative. They're tying up with local firms with proven capabilities like, Azad Engineering, to win big contracts from the Indian government.

Thus, the Indian suppliers become beneficiaries of the government's push to indigenise the manufacturing of defence equipment for the Indian armed forces, by reducing the need for imports.

For more details, check out Azad Engineering's fact sheet and quarterly results.

#4 Tata Advanced Systems Ltd (TASL)

This company is unlisted at the time of writing. However, the market is excited about the prospects of its initial public offering (IPO).

Tata Advanced Systems Ltd (TASL) is a strategic entity within the Tata Group and a subsidiary of Tata Sons. It specializes in the aerospace & defence industry.

Established in 2007, TASL is aligned with Make in India initiatives to promote the manufacturing of critical aerospace and defence solutions.

TASL primarily focuses on aerospace, maritime, and defence technology markets. It provides critical infrastructure for urban security & surveillance, and disaster preparedness.

The company has partnered with leading global aerospace and defence firms like Airbus and Satellogic. It's well-positioned to capitalise on growing demands for defence and space sectors.

In January 2024, the company signed an agreement with Airbus to supply parts for Airbus planes like the A-320 series, A350, and A-320 series.

On 19 February 2024, Air India and Tata Advanced Systems signed an MoU with the Karnataka government. It proposed an Rs 23 bn investment across various projects.

TASL has planned three projects with a Rs 10.3 bn investment which includes aircraft conversion (Rs 4.2 bn), gun manufacturing (Rs 3.1 bn), and R&D (Rs 3 bn).

TASL's potential IPO listing could attract investor interest. Though there is speculation regarding its IPO in 2024, it remains unconfirmed as of this writing.

Investors are encouraged to stay updated for the latest developments, as the potential listing might have strong impact in the aerospace and defence sectors.

You can read more about TASL here.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...