260% Dividend: Multibagger defence PSU fixes record date for payout, share capital raised to ₹700; Should you buy?

Hindustan Aeronautics Ltd (HAL) announced a final dividend of ₹13 per equity share for thefinancial year 2023-24 (FY24) and also raised the share capital allocation. Shares of HAL have risen significantly in 2024 on the back of winning multiple government orders. HAL has given multibagger returns to investors over the last one-to-three year time periods.

Last week, HAL had announced that Ministry of Defence had issued a Request for Proposal (RFP) for the procurement of 156 Light Combat Helicopters (LCH), also known as the Prachand. The deal, worth over ₹45,000 crore, includes 90 helicopters for the Indian Army (IA) and 66 for the Indian Air Force (IAF).

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HAL dividend payout

The board of the defence PSU has proposed a final dividend of ₹13 per equity share, each with a face value of ₹5, marking a 260 per cent payout for FY24. The dividend is slated for distribution to eligible shareholders within 30 days following approval at the annual general meeting (AGM). The record date for determining shareholder eligibility is set for Wednesday, August 21, 2024.

HAL had already paid an interim dividend of ₹22 per share for FY24, which was the highest in the last two years. The highest dividend paid by the company on record is ₹33.25, it paid in March 2020, according to Trendlyne data.

HAL share capital

The defence PSU's board also recommended an increase in the authorized share capital of the company from ₹600 crore to ₹700 crore on Wednesday. This will necessitate an alteration of the capital clause in the company's Memorandum of Association, pending shareholder approval at the AGM.

The decisions were made in line with Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. These corporate decisions will be presented for shareholder approval at the upcoming AGM.

HAL Share Price Trend

Shares of HAL opened at ₹5,375 and gained around one per cent to hit an intra day high of ₹5,409 against a 52-week high-mark of ₹5,585.65, before settling 1.60 per cent lower at ₹5,283 apiece on the BSE. HAL shares have gained 90 per cent so far in 2024 and 123 per cent in 2023. According to Trendlyne data, HAL has given better returns compared to Nifty 50 and Sensex in the last one year.

In the last one year, HAL has given 190.36 per cent returns to investors as against 27.88 per cent and 24.92 per cent returns by Nifty 50 and Sensex respectively. HAL is engaged in the design, development, manufacture, repair, overhaul, upgrade and servicing of a wide range of products including, aircraft, helicopters, aero-engines, avionics, accessories and aerospace structures.

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Brokerage maintains ‘hold’ on HAL stock

Domestic brokerage firm Prabhudas Lilladher said that the issue of the tender improves visibility on HAL’s order inflow and long-term execution. The brokerage believes that HAL is a long-term play on the growing strength and modernization of India’s air defence due to the following factors:

-Long-term sustainable demand opportunity owing to government’s push on indigenous procurement in defence

-Leap in HAL’s technological capabilities due to development of advanced platforms (Tejas etc)

-Robust order book with further five-year pipeline of over ₹2 trillion

-Improvement in profitability via scale and operating leverage.

‘’The stock is trading at a P/E of 39.9x/35.2x on FY25/26E earnings. We have a ‘hold’ rating on the stock,'' said Prabhudas Lilladher in its analysis.
 

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.