Concall — clean across the call.

Media reports suggest LCA Mark 1A could be delayed by a few months. When do deliveries start and what is the per-year schedule? Also, what is the expected order book accretion from manufacturing and ROH in FY24?

LCA Mark 1A delivery as per contracted schedule starts from February 2024. Current financial year FY24 target: 1 fighter + 2 trainer = 3 aircraft. We are on track. Aircraft structure will be available by June (3-4 months), systems getting certified in parallel for fitting. Even if there are minor delays, not significant — we will make good with additional capacity in subsequent years. Third line at Nashik is being established to increase beyond 16/year. Delivery schedule from FY24: 3 in FY24, then 16/year peak rate for 83 LCA contract. ROH order book accretion: Rs.17,000-18,000 crore per year, executed within 12 months. Manufacturing orders FY24 expected: Rs.48,000 crore (AL-31FP Rs.26,000cr + RD-33 Rs.4,500cr + 25 ALH Rs.3,500cr + 12 LUH Rs.2,500cr + 12 Sukhoi Rs.12,000cr). Development orders also increasing — IMRH, LCH Phase II systems, AMCA portion, UHM sanctions forthcoming.

AL-31FP 240 engine order — what stage is it? Will elections and code of conduct impact finalization? What is total order value? And on exports — which platforms, which countries, how large?

AL-31FP 240 engines: Contract negotiations (CNC) completed with customer. Paper now being put up for CCS approval — advanced stage. Expected conclusion within 6-8 months in the current financial year. Total order value approximately Rs.26,000 crore. E.P. Jayadeva on exports: Working on Philippines, Argentina, Egypt, Sri Lanka, Maldives, Botswana, Thailand, and Nigeria for LCA and helicopters (ALH, LUH, LCH). Philippines and Argentina in most advanced stage. Initial breakthrough order targeting ~USD150 million (approximately Rs.1,200 crore) mainly in ALH platform. We are following up through defense channels and services. On Russian supply chain: Some disruptions early but normalizing now. Payments channels sorting out. HAL has maintained fleet operations without disruption through COVID and geopolitical conflict. Confident supply chain will continue.

ALH grounding: Were the 3 accidents the same issue? Is the aluminum to steel control rod change a design fix or precautionary? What is the cost? Will it affect future orders (25 ALH, 140 LCH)? And what is the ROH revenue breakdown by platform and growth outlook?

E.P. Jayadeva: Three accidents in last 2-2.5 months are NOT attributable to the same issue — each is different. Design adequacy has been reinforced; no requirement to redesign the helicopter. Control rods being changed from aluminum to steel as a precautionary measure — steel is more damage tolerant under maintenance issues or misalignment. Not a fundamental design problem. Other fleet owners are still flying (Air Force still flies; Army grounded as precaution). ALH accident rate at 3.9 lakh hours is good by international comparison. This does not impact future ALH or LCH orders. C.B. Ananthakrishnan: Cost of rectification (aluminum to steel rods across fleet) approximately Rs.150-200 crore — not expensive. Many aircraft still under warranty so cost will not majorly impact profitability. ROH revenue FY23: Su-30 overhaul 20 numbers (Rs. significant contribution); AL-31FP engine ROH 76 numbers (targeting 95-100 in FY24, max 105); ALH ROH 30 numbers; rotables ~Rs.1,000 crore; spares ~Rs.5,000 crore. ROH growth: marginal increase in FY24; from FY25 onwards ROH growth drops to ~5-6% as manufacturing picks up. Overall company growth maintained by manufacturing acceleration.

HTT-40 delivery schedule: you mentioned September 2024 earlier but now it seems September 2025? How many in FY25 and FY26? On engine orders — will AL-31FP and RD-33 production start immediately upon order?

HTT-40: Contract concluded last year. T0 plus 24 months — delivery commencement from September 2025 (NOT September 2024 as I may have said earlier — correcting that). Start at 12/year, scaling to 16, then peak of 20/year. We are trying to expedite to 20 from second year onwards to conclude contract earlier as we expect another 36 numbers and potential exports. AL-31FP engines: Production to commence immediately. We are already concluding contract negotiations with Russian suppliers — not waiting for customer contract to be signed. Expect delivery from FY24-25 at approximately 12-13 engines in first year, then 30/year peak. RD-33 (80 engines): Moment contract is concluded in current financial year, we will start delivering immediately. Target 20/year over 4-5 years.

LCA Mark-2 is facing challenge with GE F414 TOT. What is the exact status and will TOT delay hamper Mark-2 timeline? Also, you booked Rs.770 crore HTT-40 development revenue this quarter with Rs.600 crore amortization — is there zero cost to that revenue?

E.P. Jayadeva: LCA Mark-2 design is almost complete; prototype production at HAL to be launched shortly. Engine production — our engine division in Bangalore has been identified as production agency. HAL has reinforced willingness to ADA; ADA taking up with GE and US government for full TOT. No major challenge with GE TOT — we will be manufacturing the engine at HAL. If GE wants business in India, they must establish TOT and manufacturing in country. C.B. Ananthakrishnan on amortization: Your assumption is correct. HTT-40 development revenue of Rs.770 crore recognized when contract was sanctioned, along with simultaneous amortization of Rs.600 crore of intangible assets (earlier capitalized development costs released from balance sheet). So no net cash cost above EBITDA line; purely accounting recognition.

How many aircrafts and helicopters were produced and delivered in FY23? For FY24, how many Tejas expected in total (Mark 1 trainers + Mark 1A)? And on the third LCA line at Nashik — what learning curve improvements are expected?

FY23 deliveries: 7 ALH + 2 LCA FOC + 8 LCH + 2 Dornier + 6 AL-31FP engines — all delivered. FY24 target for LCA: 3 Mark 1A (1 fighter + 2 trainer as per contract) + balance trainers from earlier order (approximately 8 LCA trainers as well) = minimum 8 numbers from Tejas program. Also planning to get LUH portion, additional ALH portion if orders finalized. Nashik learning curve: Productivity levels at Nashik will match Bangalore — same labor rates factored in contract. Most learning already achieved from IOC/FOC 32 aircraft fighters. Mark 1A has only 4 new systems added — limited scope for additional learning. Bangalore team already fully convergent. Nashik will have minor initial learning.

Given the order book and pipeline, what is the 3-year revenue growth trajectory? Historically, 4-5% CAGR since FY19 — is that going to change?

The 4% CAGR figure is incorrect — CAGR from FY19 has been approximately 7.7%. We have been growing at 7-8% single digit in FY23 and FY24, consistent with guidance. FY23 achieved 9.37% — slightly above guidance. FY24 will also be single-digit growth. From FY25 onwards: double-digit growth expected (10-11%). FY26: improving to ~12%. FY27+: stabilizing at 14-15%. This is backed by robust order book, new platform deliveries (LCA Mark 1A, HTT-40, ALH, engines), and Rs.48,000 crore manufacturing pipeline materializing in FY24.

From FY24, with 13-14% growth guidance, is it fair to assume net margins would also be in double digits? What is operating profit guidance?

FY25 will see double-digit growth at 10-11%. Beyond FY25, improving to 12%, then stabilizing at ~15%. Operating profit (before interest income and D&A) is currently 17-18% of revenue — a healthy level for our industry. This may improve marginally year-on-year but no substantial increase. Operating profit will hover around 18-19%. EBITDA as reported has been elevated by one-time items (HTT amortization, tax refunds) — normalized EBITDA at 26-27% is the sustainable range.

Given HAL's near-monopoly position in Indian defense aerospace and large order pipeline, will we see a step-change in top line in next 2-3 years to grow from the current Rs.3 billion (Rs.27,000 crore) level significantly?

With all favorable factors — robust order book, clear visibility, HAL's monopoly position, major programs entering productionization stage — we have projected double-digit growth from FY25 onwards improving to 14-15%. Given execution timelines for all programs, this 14-15% trajectory is achievable and is what we are working towards. Growth will be multifold in the context of current revenues and investor wealth creation.

You mentioned Rs.48,000 crore FY24 manufacturing pipeline. Al-31FP is Rs.26,000 crore. What is the breakup of the remaining contracts?

Rs.48,000 crore FY24 manufacturing pipeline breakdown: AL-31FP 240 engines = Rs.26,000 crore; RD-33 80 engines = Rs.4,500 crore; 25 ALH Dhruv = Rs.3,500 crore; 12 LUH Light Utility Helicopters = Rs.2,500 crore; 12 additional Su-30 (if materially) = Rs.12,000 crore. These together sum to Rs.48,000 crore, all expected to be concluded within 6-10 months of this call.

You mentioned LCH Prachand 140 numbers at approximately Rs.45,000 crore. What about NUH/UHM and other programs — what is the total AON-approved pipeline?

AON-approved programs (conversion into contracts will start within 2-3 years): ALH Coast Guard 9 numbers (AON approved, RFP to be floated), UHM/Naval Maritime Helicopter 60 numbers supply contract (~Rs.20,000 crore) + PBL contract (~Rs.13,000 crore) = Rs.33,000 crore combined. Total AON-approved pipeline (where certainty of orders exists): approximately Rs.36,000 crore. Beyond that, where AON is not yet approved but visibility is clear (expected within 2-5 years): LCH Prachand ~145 numbers, LUH additional ~175 numbers, HTT-40 additional 36 numbers, Dornier Navy/IAF upgrades ~60 numbers. This AON-pending pipeline is approximately Rs.65,000 crore additional.

Can you give the ROH revenue breakdown by platform for FY23 and FY22?

FY23 ROH revenue Rs.18,800 crore. By platform: Sukhoi-30 overhaul 20 numbers; AL-31FP engine ROH 76 numbers; ALH ROH approximately 30 numbers; rotables ~Rs.1,000 crore; spares supply ~Rs.5,000 crore. FY22: AL-31FP engine ROH ~80 numbers (slightly higher than FY23's 76 numbers); Sukhoi overhaul was approximately 20 numbers in FY22 as well.

With manufacturing deliveries scaling from FY25, what is the margin outlook? Provisions have been high at ~7% — how should we model going forward? Are there any pending tax disputes from FY16 onwards?

Margin outlook with manufacturing ramp: Margins should be maintained at 26-27% EBITDA. Operating profit range of 17-19% on improved productivity, outsourcing, and private industry involvement. Provisions: 7% of revenue is target but we try to be conservative. FY23 provisions include: loan items taken from Indian Air Force (to be returned when supplies made), replacement charges, warranty. These are maximum provisions — actual expenditure may be less, so provision reversals are likely in FY24, which could come back as income. Net impact on profitability from provisions should reduce in current financial year. Tax disputes: All income tax disputes settled — nothing pending from FY2008 through FY2015-16. Total received Rs.2,451 crore refund + Rs.830 crore interest over last 2 years. Last refund sanction received January-March 2023. No further IT dispute settlement expected.