Hindustan Aeronautics Limited (NSE: HAL) Q4 FY23 earnings concall dated May. 17, 2023
The next question is from the line of Umesh Raut from PhillipCapital. Please go-ahead.
— PhillipCapital — Analyst
Thank you so much for giving me an opportunity. Sir, my first question pertains to one of the major prospect that we have in the form of LCA Mk2 where as per the some of the media sources, now we are facing the challenge of signing TOT contract for supply of engine GE’s F414. So, I want to know what is exactly the status for development of LCA Mk2 and would that — would this TOT delay will hamper development timelines for LCA Mk2.
— Director Operation
The LCA Mk2 design is almost — design of all the parts is almost completed. And shortly, we want to launch the [Indecipherable] production at AHL. Regarding the engine production also, we have given our, in fact, we are the production agency for GE 414 earlier also. Our ending division in Bangalore has been identified as a production agency. Recently given our willingness to be part of this also — reinforced our willingness to ADA also. ADA is speaking up with GE and the U.S. government to see that the TOT is given to the full extent.
After that, we are expecting the contract to be concluded once the ADA [Indecipherable] sanction in full form.
Sanction in full form.
— PhillipCapital — Analyst
But sir, do you see any major challenge in signing TOT with GE?
— Director Operation
No, we are not finding any problem with the TOT with the GE.
We’ll be manifesting the engine at scale.
C. B. Ananthakrishnan
— Director of Finance and Chief Executive Officer
In fact, just to add to that, today the sort of our strategy with all our supplies including the engine manufacturers is quite clear. if at all they have to do business in India, they will have to have the TOT and the manufacturing facility established within the country. So we are working with all our OEMs towards that and we are confident that that will happen. And because they also have understood that once if they have to do business with India and with HAL, they will have to have the facilities established in the country. So we will be able to negotiate to our requirement of having a full TOT getting done within India.
Quoting those that must not be quoted-
The Engine Division of Hindustan Aeronautics Limited (HAL) in Bangalore is in the lead to secure a contract for the local manufacturing, under license, of the General Electric F414 engine for the Tejas MkII program. This significant development comes as General Electric awaits final clearance from the Biden administration regarding the Transfer of Technology (ToT) for the engine, which includes clearance for the Core section of the engine to be transferred to India.
General Electric anticipates substantial orders for approximately 300 engine units solely from India for its Tejas MkII, TEDBF, and AMCA MkI fighter jet programs. Once the necessary clearances are obtained, the local manufacturing of the F414 engine by HAL’s Engine Division would not only strengthen the indigenous production capabilities but also contribute to India’s self-reliance in the defence sector.
The collaboration between HAL and General Electric holds great potential for enhancing the Tejas MkII program and other future fighter jet projects. The production of F414 engines locally would not only provide technical expertise but also create job opportunities and boost the overall aerospace industry in India.
The Indian Ministry of Defence (MoD) insisted on interest in establishing local assembly facilities for engines and manufacturing key parts within the country. This move aims to stabilize the production systems and ensure a steady supply of frequently replaced components, ultimately reducing operating costs while enhancing the combat readiness of the Indian Air Force (IAF).
Officials familiar with the matter told idrw that, the local manufacturing facilities and infrastructure will play a vital role in bolstering the Tejas mk2 fleet once it enters production. The initiative is seen as a significant step towards achieving self-reliance in the defence sector and reducing dependence on foreign suppliers.
GE Aviation, a leading global aircraft engine manufacturer, has expressed its intent to establish local manufacturing capabilities for F414 engines in India. The company has submitted its proposal and is now awaiting final approval from the Biden administration, which is expected to coincide with Indian Prime Minister Narendra Modi’s upcoming state visit to the United States.
The decision to focus on local manufacturing aligns with the broader vision of the Indian government’s Make in India campaign, which aims to promote indigenous production and boost the domestic defence industry. By encouraging local assembly and manufacturing, the MoD seeks to create a self-sustaining ecosystem that can support the production needs of the IAF and other branches of the armed forces.
The move is expected to have a positive impact on the Tejas mk2 program, which is the upgraded version of India’s indigenous Tejas fighter aircraft. The enhanced local manufacturing capabilities will provide a strong foundation for the Tejas mk2 fleet, ensuring a reliable supply chain, efficient maintenance processes, and cost-effective operations.