Rising Orders, Slowing Revenues: HAL’s Growth Paradox

India’s defense sector is witnessing renewed government support, but Hindustan Aeronautics Limited (HAL) finds itself at the center of a paradox — an expanding order book but slowing revenue growth.

A Record Order Book

The Cabinet Committee on Security (CCS) recently approved the procurement of 97 Light Combat Aircraft (LCA) from HAL, pushing its order book further from  ₹1,89,302 crore. This translates to an order-to-revenue ratio of nearly 6x, almost double HAL’s three-year historical average. For investors, this provides strong demand visibility and reaffirms HAL’s dominant role in India’s defense modernization.

The Execution Challenge

Despite a robust order pipeline, HAL’s revenue growth tells a different story. Over the past three years, the company has delivered a CAGR of just 8%, reflecting persistent challenges in execution and delivery timelines. While demand is abundant, the ability to translate orders into revenue remains constrained.

In Contrast peers such as Cochin Shipyard (CSL), Garden Reach Shipbuilders (GRSE), and Mazagon Dock (Mazdock) have seen a decline in order-to-revenue ratios in FY25 as compared to their average of last 3 Years order to revenue ratio. Though the order inflow of shipbuilding orders were lower as compared to aircraft in FY25 , the major challenge for HAL lies in its execution

Government Spending as a Tailwind

With the recent resurgence in defense spending, HAL is well-positioned to benefit. The focus on indigenous manufacturing under the “Atmanirbhar Bharat” initiative and rising defense allocations provide a multi-year growth runway. However, the true test will be accelerating production, improving supply-chain efficiency, and ensuring timely deliveries.

Outlook for Investors

HAL’s strong order book offers visibility, but the disconnect between orders and revenues could weigh on near-term performance. If HAL can bridge this execution gap, it could unlock significant value for shareholders. For now, HAL remains a long-term structural story — but one that hinges on operational discipline.