India’s largest aerospace and defence company, Hindustan Aeronautics Limited (HAL) witnessed strong buying on Friday, sending its share price 7.3% northward. The scrip reached a fresh all-time high of ₹ 3785.00 apiece, following an announcement by the company regarding a stock split. 

In an exchange filing Hindustan Aeronautics Limited said that its board of directors will meet on June 27, 2023, to consider the proposal for the sub-division/ split of the company’s equity shares. 

Companies generally go through a stock split to increase the number of outstanding shares by issuing more shares to existing shareholders. A stock split decreases the market price of shares, however, the market capitalization of a company does not change. This corporate action makes shares more affordable for new investors and increases liquidity. 

HAL has almost delivered multibagger returns in the past year, as its share price gained 97.76% increasing from ₹ 1892.95 apiece to ₹ 3,743.45. In fact, its shares gained a massive 21.51% since the beginning of this month, as it continued its gaining streak. 

In a recent report, ICICI Securities highlighted that HAL’s order book is likely to be boosted further. It said that the company is optimistic about securing a contract worth ₹ 120bn for the production of 12 additional Su-30MKI multirole fighters for the Indian Air Force by next year (FY25). Moreover, the management expects contract negotiation for 240 units of AL31FP engines at ₹ 260 billion to be concluded soon. 

HAL is a large-cap stock with a market capitalization of ₹ 1,17,952 crores. It has a high return on equity of 27.18% and a dividend yield of 1.42%. Its shares were trading at a price-to-earnings ratio of 20.24, which is lower than the industry P/E ratio of 31.89, indicating that the stock might be undervalued as compared to its peers. 

The government holds a 71.65% stake in the company, followed by foreign institutions with 9.07%, mutual funds with 8.84%, retail investors with 5.89% and other domestic institutions with 4.55%. 

Written By Simran Bafna 


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