An Indian Air Force Tejas fighter jet, developed by Hindustan Aeronautics Ltd., sits on the tarmac. (Photographer: Anindito Mukherjee/Bloomberg)  

HAL Taps Into Credit Lines To Tide Over Cash Crunch

Hindustan Aeronautics Ltd. has tapped into credit lines to tide over cash crunch, according to its Director of Finance CP Ananthkrishnan.

India’s largest aeronautical company has been facing cash-flow concerns due to piling receivables—or pending payments—from clients. These more than doubled since March 2017 to Rs 9,845 crore as of September 2018. The payments are mostly due from the government as HAL gets more than 90 percent of its revenue from Indian Air Force.

“The issues with respect to receivables were that the orders were based on advance payments and milestones, which hasn't been paid,” Ananthkrishnan said, adding that the company’s agreement with clients does not factor in the working capital cost due to non-payment of dues. “We are in discussions with them on this issue.”

While using credit lines will impact financing cost but it will ensure operational efficiency and compensate for it, according to Ananthkrishnan.

HAL has been streamlining its quarterly revenues to remove lumpiness and that should bring in some respite, he said at the 12th Aero Show in Bengaluru. The company closed the April-December period with a revenue growth of 3 percent and net profit growth of 13 percent.

The Rafale deal continues to be a sore point for the Bengaluru-based company. It’s not interested in the offsets for the current Rafale jets, R Madhavan, chairman and managing director of HAL, said. “We are interested in the strategic partnership programme and have been in touch with Boeing,” Madhavan said. “Even if the fighter jet order is bagged by others, we are interested in the 40 percent indigenisation part.”

Also read: Why HAL’s Cash Crunch Worsened

HAL’s current order book includes 32 light combat aircraft Tejas and is expecting order for another 83 LCA to come through. The state-run enterprise is also expecting orders for helicopters to come its way. “We have an order book of over Rs 61,000 crore excluding the 83 LCA and Helicopter orders,” said Madhavan.

The company, which has been criticised for delivery is looking to streamline its process and outsource large portion of its activity. It recently outsourced construction of LCA wings to Larsen and Toubro. So far, it used to outsource only tier-3 services but it has now decided to outsource Tier-1 services to ensure it meets the delivery schedule of 16 aircraft a year.

The company will soon complete the deliveries of Sukhois and post that it plans to use the existing facilities for maintenance, repairs and overhauling of these aircraft. In addition, we are expecting order of Sukhois from Indian Air Force, Madhavan said.