“It is very critical for the country to become self-reliant in our defence requirements. Our dependability on the foreign OEMs, foreign original equipment manufacturers, and foreign suppliers should slowly come down, so that from a net importer, we should become a net exporter. And today, we are progressing towards that goal. Sooner or later, India will start exporting our platforms after meeting the requirements of our own defence forces,” said C. B, Ananthakrishnan, CMD, HAL, in an exclusive interview to Deepak Kumar Rath, Editor. Excerpts:
I can say in the last one decade HAL has come out with more and more of our own Indigenous platforms, indigenous aircraft and helicopters. Earlier, we had only the advanced light helicopter in our kitty and today we have got a range of aircraft starting from the Hindustan Turbo Trainer, which is to be used for training for the rookie pilots. And then we have fighter segment, LCA Tejas, which has come out successfully. LCA Mark one and then now we graduated to Mark III. In the helicopters, we have got the light combat helicopter Prachand, which has been inducted into the Indian Air Force, and which has been fully developed now. And similarly, light utility helicopters, we will be supplying it to the defence forces soon. And apart from that, we have also been in a big way doing the indigenisation. We are doing indigenisation not only for own platforms and helicopters and aircraft, but also in terms of various accessories and avionics. And there is a possibility of more of indigenisation. So, the thrust is on indigenisation. We have got a range of our own products. That is the second thing. And the third one is that we have also become a listed company, where the public also started participating in investing in HAL’s growth story. And when we listed, what we were? We were at around Rs 40,000 crores of market capitalisation in 2018. Today, our market capitalisation stands at a whopping Rs one lakh 30,000 crore. We have grown almost three fold in the last four to five years. That is another significant achievement, which we have done and we have been achieving year on year in the last five years. Continuously, we have been achieving record sales. The last year on 31st March 2023, we again touched a record sales turnover and that is another of our Rs 26,500 crore with a profit of Rs 6,000 crore plus. And today we stand at a very comfortable place in the aerospace and defence industry in the country.
See, it is very critical for the country to become self-reliant in our defence requirements. Our dependability on the foreign OEMs, foreign original equipment manufacturers, and foreign suppliers should slowly come down, so that from a net importer, we should become a net exporter. And today, we are progressing towards that goal. Sooner or later, India will start exporting our platforms after meeting the requirements of our own defence forces. And this is what is very critical. And why this self-reliance is becoming very critical is because of the reason that during the Covid pandemic time and subsequently during the geopolitical situation, the supply chain from the foreign countries had all been disrupted. But, since we did have a sufficient inventory, we came out of that crisis. Otherwise, the supply chain disruptions would have become very critical for the country's fleet. So today, we have started looking at ourselves and started indigenising defence products. Hence, in the long run, we will be completely developing a domestic supply chain, which is capable of taking care of our own requirements. For this, we will develop a complete ecosystem, developed within the country and that will be very critical to become self-reliant and ensure that our supply chain disruptions do not happen.
We understand that the future warfare is going to be a combination of manned and unmanned vehicles. So, we have also started our R&D towards these manned and unmanned combinations. And we have gotten the rotary wing UAV, which is a rotary combat vehicle. It is in the development stage. It will also be used by armed forces in the high altitude areas, where they will have to transport defence equipment. So, this is one thing we are focusing on. Besides, there is a programme, which is a Combat Air Teaming System. This is a combination of manned and unmanned systems, where we will be operating. It will be a sort of a mothership within the country, mother aircraft will be there within the country. And then we will operate the unmanned aircraft into the enemy's territory, which will all be controlled from our territory. So, this is something we are developing in the country.
Maintenance and repair and overhaul is very critical for the maintenance serviceability of the fleets and maintainability of fleets. It is not sufficient if to manufacture and deliver an aircraft, the after sales support and mechanism is equally important. As I have already indicated, if an aircraft is sold, we have to be there in the business for the next 40 years to see that the aircraft is supported. In fact, we have gained this experience in maintenance and repair, which stands us in good stead. And we continue to support even the some of the older fleets like Jaguar and MiG series, which have otherwise been not operating elsewhere. We have been supporting that because of our in-house capabilities. We are also strengthening our activities to see that the future aircraft, which are getting delivered today, will also be supported in a similar way. For this, we are entering into a certain long-term business agreements with many of the foreign OEMs, where we need to source certain of these items. We are also trying to focus on indigenisation of many of these items within the country so that it will also help us. In this way, the supply chain will become more robust and will become self-independent of the dependency with the foreign suppliers. So, with all these things and with our expansion plans, which are on the anvil, HAL will script a new chapter in indigenisation. What is more, in the last two-three years, our major portion of revenue has also been coming from the repair and overhaul activity.
We have started getting into digitization of the maintainability of the aircraft. We wanted to have this health monitoring systems and other systems, which is all to be digitalised, so that the seamless flow of information will be there. We also want to use the artificial intelligence in the certain of our fleet maintainability, and apart from that, we are continuously moving forward for automation in the future warfare, wherever it is required. We also wanted to adopt the certain advanced technologies, which we are already discussing with some of the foreign partners to see that our future programmes will get a major portion of this new advanced technologies into that. And I think we are fully aware and we are fully preparing ourselves to see that these technologies are getting integrated with our existing technologies. In fact, we are trying to upgrade some of our older divisions as well with the new technologies, so that there will be some seamless flow of activities, which will happen.
See, this aero engine is an area where we have a very few foreign OEMs. In the global market, there are only two or three major players, because this is an activity that requires complex research and development. That is why, so far, we have not been focusing on. In fact, we did have that with the Kaveri engine. We also have adopted two or three programmesm but those are in a very primitive stage. The most important step is that first we will have to understand the technology, which is required for that. That way, the collaboration with GE for bringing in the technology within the country and that too at 80% of the technology is going to be under ToT. We will be doing the manufacturing here. They will give us a lot of scope for understanding and absorbing the technology, which will be a basis and which will give us enough learning. So that in future, we will be in a position to develop the engine on our own. That way, the agreement, which we have reached through and which will we be shortly entering into the manufacturing activity with GE, will be a breakthrough arrangement. Apart from that, for the helicopters programme, we have tied up with Safran for joint development within the country, for an aero engine, which will be used in the helicopter programme. This is a big breakthrough, which will lay a solid foundation for the future development of engines, because if you can only master that engine technology in the years to come, then we will be a complete self-reliant. So we have all the requirements having been done and we will be starting the activities in the next three to four months. So far as the programme and the engine are concerned, we are on the right track and we are moving very fast to get it done. We have also started very serious discussions with GE for the 404 engine, for which we have already entered into an MoU. Now there are processes of approval to be taken at the US level, which has also come.
The aero engine programme itself is a bit complex programme which has to be consistent and which has to be carried over a longer period of time. Even in the global market, there are only two or three major companies, which can manufacture the engine, and they have all come to this stage after some 50-60 years of continuous design and development. And now if we continue in the same speed with which we have taken it up, I think in the next ten year time frame, we should also be in a position to compete with the global engine manufacturers, and our product will also be a global product.
Today, HAL’s focus is very clear. We want to have all our products indigenously designed and developed within the country. So, we have also started towards this initiative. The Prime Minister's vision of Atmanirbhar Bharat can be achieved only if you start investing more and more on R&D. And that we have realised and today our investment in R&D is being substantial. We invest on an average 6 to 7% of our total profit and total revenue towards our R&D activities. And this is going to be a big investment. And we have also created a separate fund for our R&D by earmarking 15% of our profit after tax every year towards our R&D activities. One big change which we have brought in is earlier we were waiting for the government approvals and sanctions and many of the R&D programmes would commence only after the sanctions and advances received from the respective customers or from the government. Today, we do not wait for that, we take clearance from the board and we initiate our R&D activities. And that is one reason why we are in a position, where we are able to deliver the products well in time.
See evolving challenges include the platforms which we are manufacturing, we are fitting it with advanced technologies so that they can take care of all requirements of armed forces to counter the enemies. And as far as the asymmetrical warfare is concerned, we do focus on UAVs. We have initiated programmes of the rotary wing side as well as on the fixed wing, which is a programme to take care of the future warfare. But as of now, our main focus is to see that the aircraft and the related accessories are fitted with the more advanced technologies, so that the armed forces’ requirements are met.
What is very important is that we need to deliver the aircraft, which has all been contracted. Many of the programmes we are running around now are those we are entering into contract. There are many programmes on the rotary wing for which we will have to deliver the products in time and deliver the products of good quality and with better technologies to the country. This is going to be the primary focus. Apart from that, we should also prepare ourselves for the next ten years beyond. And that is where we have also launched many of the programmes like the one on the combat helicopter programmes. Then we will be taking it to the more advanced system in the phase two, which will also be taken up very shortly. This will be empowering the helicopter programme. And apart from that, the Indian medium helicopter programme is the next, which will also have to be completed in the next six to seven years’ timeframe. And on the fixed wing, already we are talking about Mach two. Mach one is what we are presently producing. Mach two is another major programme, which will come up in the next three to five years timeframe, for which we need to start preparing ourselves and delivering the aircraft in the next ten years. The programme Advanced Medium Combat Aircraft Programme is at the design stage. So, these are all the major programs as we could see.
As you could see today, the fundamental financials are quite strong. Today, we are a zero debt company and we have got reserves and surplus of almost Rs 24,000 crore. So, we can always leverage with the borrowings from the banks and raising funds from the market. So, if there is going to be any requirement, as of today, we are able to meet that requirement.
It is happening now. What you say was in the past. Now this transition has happened. You see these numbers. You talk to me in three years. You will see that currently most of the indigenous orders go to PSUs. 70 per cent of the indigenous orders go to PSUs and 30 per cent to the private sector, but in the next three to five years, you will see the reverse, 60 to 70 per cent will be done through the private players. MSMEs provide the back end. You see when you make a large defence system, the order goes to large companies like HAL or BEL or L&T. But they don't do all the manufacturing. No large company in India today can produce everything on their own. They depend on MSMEs for all the production. You see, today we have got MSMEs, which are empanelled, in excess of 2000. Hence, 2000 plus MSMEs are already empanelled and they are all active MSMEs and we keep expanding this list.
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