Hindustan Aeronautics Ltd. shares tanked 5% on Thursday, extending its decline to a second session after reports said the defence ministry shortlisted private players over the PSU giant for an advanced fighter jet program. The stock lost 5.7% in value in the previous session when the news came.

HAL lost out to Tata Advanced Systems Ltd., Larsen & Toubro Ltd., and Bharat Forge Ltd. to develop and manufacture India’s next-generation fighter aircraft under the prestigious Advanced Multirole Combat Aircraft (AMCA) programme. The final selection is expected within the next three months, according to a report in The Economic Times.

The defence ministry has evaluated technical bids from seven Indian firms and has shortlisted TASL, L&T, and Bharat Forge. HAL, which manufactures most of India’s military aircraft, has not made the cut. The final selection is expected to take place after the shortlisted companies submit detailed commercial proposals for manufacturing prototypes of the next generation jets, ET reported.

In a stock exchange filing on Wednesday, HAL clarified it has not received any official communication in this regard and will, therefore, not comment on the reports. 

The AMCA is a key programme for India’s indigenous defence manufacturing and primarily involves collaboration between the DRDO as the primary research and development agency and HAL as a manufacturing partner. 

HAL share price was trading 4% lower at Rs 4,403 apiece on the NSE as of 9:25 a.m. The relative strength index was at 35, close to a level that indicates ‘oversold’ zone. The stock has risen 6% in the last 12 months.

Outlook

Analysts at Morgan Stanley slashed their target price for HAL stock to Rs 3,355 from Rs 5,092 and downgraded rating to ‘Underweight’ from ‘Equal-weight’. They see downside risk to the stock given increased private sector competition while slower execution persists due to high import dependance as multiple countries look to increase defence spend.

JPMorgan, while not tweaking its rating or target price, said the loss of the AMCA loss is negative for HAL but was largely expected. The company’s already large order book is seven times its current revenue and it has “ample opportunity” to secure more deals. 

Twenty-one out of the 25 analysts tracking HAL have a ‘buy’ rating on the stock, two recommend a ‘hold’ and two suggest a ‘sell’, according to Bloomberg data. The average of 12-month analyst price targets is Rs 5,627, which implies a potential upside of 37%.

ALSO READ: AMCA Program Restructuring: ‘No Official Communication,’ HAL Clarifies Amid Major Share Selloff

Representational image of a traffic signal in the foreground of the Bombay Stock Exchange on Dalal Street. File

Equity benchmark indices declined in early trade on Tuesday in line with weak trends from Asian markets and fresh foreign fund outflows.

The BSE Sensex declined 218.11 points to 73,787.83. The NSE Nifty dipped 97.45 points to 22,404.55.

Among the Sensex components, Nestle, Mahindra & Mahindra, Bajaj Finserv, Axis Bank, Hindustan Unilever and ICICI Bank were the major laggards.

Tata Steel, Power Grid, Tata Steel and Asian Paints were among the gainers.

In Asian markets, Seoul, Shanghai and Hong Kong were trading lower while Tokyo quoted in the positive territory.

Wall Street ended mostly higher on Monday.

Foreign Institutional Investors (FIIs) offloaded equities worth Rs 92.95 crore on Saturday, according to exchange data.

Global oil benchmark Brent crude declined 0.56% to $83.24 a barrel.

The BSE benchmark climbed 88.91 points or 0.12% to end at 74,005.94 in a special trading session on Saturday. The NSE Nifty advanced 35.90 points or 0.16% to 22,502.

The National Stock Exchange (NSE) and BSE conducted a special trading session in the equity and equity derivative segments on May 18 to check their preparedness for handling major disruptions or failures at the primary site.

Among individual stocks, Nestle India fell over 2%, walking back gains made in the previous session, as the shareholders of the local arm voted against a royalty hike to Swiss parent Nestle SA.

The KitKat chocolate maker was the top loser on the benchmark Nifty.

Bharat Electronics rose 9% to a record high after reporting a 30% jump in March-quarter profit.

Oil India rose about 4% to an all-time high after reporting a rise in fourth-quarter profit.

Markets were closed on May 20 due to the fifth phase of the Lok Sabha elections in Mumbai.