Tejas Mk1A Resumes Flights Amid Production Hurdles
Hindustan Aeronautics Limited (HAL) will restart flight operations for its Tejas Mark 1A fighter jet program next week. This follows Chairman DK Sunil's confirmation that technical issues with the aircraft's brake software have been resolved and cleared by the local modification committee. This allows renewed testing and development for the fighter jet.
Engine Shortage Continues to Stall Deliveries
A critical constraint remains: the supply of General Electric F404-IN20 engines. HAL expects to deliver a total of 20 engines in the latter half of 2026. This is far fewer than needed for the 83 Tejas Mk1A aircraft on order. Reports from early 2026 indicated HAL had received only a handful of the initial 99 contracted engines, leaving many assembled airframes grounded. This engine shortage directly impacts HAL's ability to meet delivery commitments for the Tejas Mk1A program, which is already over two years behind schedule.
Market Concerns Persist Despite Flight Resumption
Despite the news of flights resuming, HAL shares traded lower, down 8% over the past month, showing investor caution. This contrasts with the positive flight news, highlighting investor concerns about HAL's execution capabilities and ongoing delays. HAL reported FY26 revenue of ₹32,250 crore, up 4% but below its 8-10% guidance, largely due to delays in the LCA Mk1A and HTT-40 programs. HAL's order book stands at a large ₹2.54 lakh crore, offering about 7-8 years of revenue visibility, but converting this backlog into timely deliveries is crucial.
Past Incidents Raise Safety Doubts
The Tejas program has faced scrutiny after several incidents. A runway excursion in February 2026 was linked to a software glitch, and a fatal crash happened at an airshow in Dubai in November 2025. These events, along with another runway overshoot in February 2026, have led to investor concern and stock drops, raising questions about the aircraft's safety record and HAL's maintenance. While HAL states the Tejas has a strong safety record, these recurring incidents contribute to concerns about the program's reliability.
Valuation Faces Pressure Amid Delivery Woes
Hindustan Aeronautics Limited has a market capitalization of approximately ₹2.45 lakh crore, making it India's largest defense manufacturer by revenue. Its trailing Price-to-Earnings (P/E) ratio is about 27-34. This appears elevated given the persistent production and delivery challenges. Competitors like Bharat Electronics trade at a P/E of around 51, while Bharat Dynamics and Data Patterns have P/E ratios exceeding 70. This valuation suggests strong growth expectations, which could be hard to achieve if engine supply issues and production bottlenecks are not resolved quickly. HAL is expanding production capacity, including a third LCA Tejas production line aiming for 24 aircraft annually. However, even at this rate, fulfilling current orders will take nearly eight years.
Outlook Depends on Production Acceleration
A critical review for the Tejas Mark 1A, due in May, will set its induction timeline for the Indian Air Force. Successfully completing this review and starting deliveries are key to confirming HAL's readiness. Analysts generally hold a positive long-term view, supported by the large order book and the program's strategic importance for India's defense. However, the market will closely watch engine procurement progress and faster production to justify the current stock price.