2 weeks ago
HAL’s Aftermarket Business Emerges as Defence Growth Engine
Hindustan Aeronautics Limited earns money not only by building military aircraft but also by looking after them afterward.
This includes repairs, spare parts, engine work and upgrades.
Military aircraft can be used for many years, so they need regular support.
Kotak Institutional Equities estimates that this support business has an order book worth about Rs 24,000 crore.
HAL’s support revenue is expected to increase to Rs 29,000 crore by FY31.
Older aircraft may be upgraded instead of replaced, creating more work for HAL.
The planned Super Sukhoi upgrade could become a particularly large opportunity.
New Indian aircraft such as the Tejas Mk1A, LCH and LUH could also create future maintenance demand.
However, HAL’s manufacturing business is expected to grow faster, which may reduce profit margins.
HAL’s Repair, Overhaul & Spares business accounted for about 62% of FY26 revenue, up from 49% in FY19.
Kotak Institutional Equities estimates HAL’s ROH, spares and upgrade order book at approximately Rs 24,000 crore in FY26.
ROH revenue is projected to rise from Rs 20,500 crore in FY26 to Rs 29,000 crore by FY31.
The Super Sukhoi upgrade programme could cover more than 80 aircraft initially and potentially exceed Rs 50,000 crore.
Manufacturing is expected to grow faster than aftermarket services, potentially reducing ROH’s revenue share and pressuring margins.
- Who
- Hindustan Aeronautics Limited, with estimates and projections from Kotak Institutional Equities, is at the center of the analysis.
- What
- HAL’s maintenance, repair and overhaul, spares, upgrades and life-extension businesses are becoming major recurring revenue sources.
- Where
- The opportunity is centered on India’s military fleet, with additional export and support prospects in Malaysia.
- When
- The estimates cover FY26 through FY31; the Super Sukhoi programme’s mass production is expected to begin no earlier than FY33-34.
- Why
- Growing fleets, ageing aircraft, greater aircraft use and the expansion of indigenous platforms are increasing demand for long-term maintenance and upgrades.
Key facts
- FY26 ROH revenue share
- Approximately 62% of HAL’s revenue, compared with about 49% in FY19.
- FY26 ROH order book
- Approximately Rs 24,000 crore, covering ROH, spares and upgrade contracts.
- Projected ROH revenue
- Expected to increase from Rs 20,500 crore in FY26 to Rs 29,000 crore in FY31.
- Super Sukhoi opportunity
- More than 80 aircraft in the first phase, potentially worth over Rs 50,000 crore.
- Manufacturing growth
- Manufacturing is projected to grow at a 32% CAGR and reach about 42% of revenue by FY31.
- EBITDA margin outlook
- Expected to decline from 29.5% in FY26 to 27.9% in FY30, according to Kotak.
- Potential project pipeline
- Approximately Rs 4.6 lakh crore beyond recurring ROH business; this is a pipeline, not confirmed orders.
Sources
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