India's state-owned aerospace and defense giant, Hindustan Aeronautics Limited (HAL), reported a 9% increase in its third-quarter profit, buoyed by rising aircraft demand from the defense sector and an inventory-related gain.

HAL's net profit reached 12.61 billion rupees ($151.92 million) for the three months ending December 31st, 2023. This positive performance mirrors trends in India's capital goods and manufacturing sector, which benefit from the government's push for increased capital expenditure, announced last year before the upcoming general elections.

This government initiative has fueled profits for other defense equipment manufacturers like Zen Technologies, Bharat Electronics, and Bharat Dynamics, and HAL is riding the same wave. The company, which supplies aircraft and other equipment to the Indian armed forces and global aerospace corporations like Airbus and Boeing, saw its revenue grow 7% to 60.61 billion rupees during the October-December period.

Further contributing to HAL's improved financial picture was a 2% decrease in total expenses, coupled with a 1.11 billion rupee gain related to inventory changes. However, the company did not disclose the specific details of these inventory adjustments.

While the inventory gain provided a short-term boost, HAL also faced raw material price hikes during the quarter, with costs rising nearly 37% due to global fluctuations in metal prices, including steel.

Overall, HAL's performance reflects the current state of India's defense sector, witnessing growth fueled by government initiatives and a rising demand for aircraft and other military equipment. However, rising raw material costs remain a challenge for the company in the future.