Shares of Hindustan Aeronautics Ltd (HAL) experienced a sharp decline of 8% on Wednesday, hitting an intraday low of ₹4,100 on the BSE. This downturn followed the news that HAL was not shortlisted for the Advanced Multirole Combat Aircraft (AMCA) program, a project to develop and manufacture next-generation fighter jets for the Indian Air Force.

The companies selected for the AMCA program include Larsen & Toubro (L&T), Bharat Forge, and Tata Advanced Systems. These private sector players will now compete to partner with the Aeronautical Development Agency (ADA) to build prototypes of the fifth-generation fighter jet. The AMCA is envisioned as a key component of India's air combat capabilities from the mid-2030s.

The selection process considered factors such as technical expertise, manufacturing capabilities, order book position, and financial strength. Bidders were required to demonstrate their ability to absorb the AMCA design, along with experience in development, engineering, manufacturing, integration, and testing. One of the eligibility criteria also discouraged companies with a large outstanding order book.

L&T and Bharat Forge stocks saw a positive impact from the news, trading over a percent higher. This divergence highlights the market's anticipation of growth opportunities for the private players in the defense sector.

HAL, a state-owned aerospace and defense company, actively supports the 'Atmanirbhar Bharat' initiative, focusing on indigenous design and development to meet future defense and aerospace requirements. As of March 2024, HAL's order book stood at over ₹94,129 Crore, reflecting a strong market position. The company manufactures aircraft and helicopters, including the Light Combat Aircraft (LCA) Tejas and the Advanced Light Helicopter (ALH) Dhruv.

The winner of the AMCA program is expected to be selected within the next three months, following a detailed submission of commercial proposals for manufacturing prototypes. This decision will shape the future of India's defense manufacturing landscape and the nation's air power capabilities.