HAL Tumbles 4% As Markets Rethink Defence Valuations

Defence stocks tumbled on Monday, 23 February, as investor sentiment turned cautious following reports of a fresh technical incident involving the Tejas light combat aircraft.

The Nifty India Defence index fell 1.09% in intraday trade, sliding to a low of 8,010 on the National Stock Exchange (NSE). Most constituents traded in the red. The move reversed part of the gains seen in the previous session.

Hindustan Aeronautics Limited (HAL) shares led the decline. The stock dropped as much as ~4.7% during the day and was trading near ₹4,047 on the BSE by mid-afternoon. Cyient DLM fell 4.9%, while Bharat Dynamics declined 3.7%.

Shipbuilding stocks: Mazagon Dock, GRSE, Midhani, and Cochin Shipyard slipped between 1 and 2% in intraday deals.

What Triggered The Sharp Fall In HAL Shares?

The selloff followed a PTI report stating that a Tejas aircraft of the Indian Air Force suffered major airframe damage after overshooting a runway at a frontline airbase earlier this month. The incident was reportedly linked to a suspected brake failure. The pilot ejected safely after returning from a training sortie.

After that, IAF grounded around 30 single-seat Tejas jets as a precautionary measure to conduct detailed technical checks.

This was the third accident involving Tejas aircraft in recent years:

• March 2024: A Tejas jet crashed near Jaisalmer

• November 2025: A jet crashed during an aerial display at the Dubai Airshow

• February 2026: Runway overshoot resulting in airframe damage

HAL later issued a clarification to stock exchanges. The company stated that there was no crash and described the event as a minor technical incident on the ground.

Are Delivery Delays Amplifying Investor Concerns?

The timing of the incident has added to existing worries around execution. HAL continues to face delays in delivering the Tejas Mk-1A variant.

In February 2021, the defence ministry signed a ₹48,000 crore contract with HAL for 83 Mk-1A jets. This was followed by another order worth ₹62,370 crore in September last year for 97 additional aircraft.

Deliveries have been delayed mainly due to missed timelines by GE Aerospace for supplying F404 aero engines. HAL has maintained that production readiness is not a concern. The company has stated that 14 aircraft are already ready and that 24 jets are expected to be completed by the end of FY2026.

Still, repeated slippages tend to matter when valuations are stretched.

Does This Change The Long-Term Outlook?

The recent slide has not erased HAL’s longer runway. Orders are still coming in, and visibility remains strong. As of 30 June 2025, the company’s order book stood at roughly ₹1.9 lakh crore, up sharply from ₹94,000 crore in March 2024. That expansion matters.

FY2025 was not a quiet year. HAL locked in multiple large contracts, spanning both manufacturing and maintenance:

• ₹62,000 crore for light combat helicopters

• ₹25,000 crore for AL-31FP engines used in the Su-30MKI fleet

• ₹12,000 crore for 12 Su-30 MKI aircraft

• Nearly ₹20,000 crore from repair and overhaul work

Also Read - India-EU FTA May Disrupt Sula’s Premium Wine Business

The numbers on the income statement remain steady. Revenue for FY2025 came in at ₹30,981 crore. Management has guided for 8–10% growth across FY2026–27.

That trend showed up in the latest quarter. Q3 FY26 revenue rose 10.67% year-on-year. Net profit grew faster, jumping 29.65%.

The balance sheet adds another layer of comfort. HAL operates with minimal debt and continues to post strong return metrics, with ROCE at 33.9% and ROE at 26.1%.

The selloff highlights how sensitive high-momentum sectors become once expectations peak. For investors, the focus should stay on delivery timelines, production scale, and earnings visibility, rather than short-term headlines.

Sources

Economic Times

Livemint

Trade Brains