Safran Vs Rolls-Royce-Reliance: HAL, BEL or L&T, which defence stock could benefit? CLSA reveals

CLSA highlighted that  India has become “the most promising defence fighter and helicopter engine market in the world”, with the government having awarded US$17 billion of Make in India contracts covering fighter jets, engines and helicopters. The brokerage continues to rate Hindustan Aeronautics, Bharat Electronics and Larsen & Toubro ‘Outperform’, with Bharat Electronics carrying the highest potential upside among the three.

The immediate trigger is the AMCA Mk2 engine programme. Safran has been selected for a 120 kilonewton engine research and development contract, while Rolls-Royce has partnered with Reliance Industries to explore an aerospace gas-turbine engine hub in India. CLSA’s view is that the technology-transfer delay at General Electric created an opening for Safran, while the Rolls-Royce-Reliance proposal adds another potential route for India’s indigenous fighter-engine ambitions.

Source: CLSA, August 17, 2026.

CLSA on Hindustan Aeronautics: ‘Outperform’

Hindustan Aeronautics has the most direct exposure to the fighter-engine opportunity among the three stocks. CLSA highlights more than$3 billion of engine orders, a pipeline of 350-plus jet engines, a long-term maintenance, repair and overhaul opportunity and an export opportunity through its Safran relationship.

The brokerage says Hindustan Aeronautics makes fighter engines for the AL31FP and RD33 programmes and is also expected to conclude the technology-transfer arrangement for the General Electric F414 engine. The F414 is intended to power the Tejas Mk2 and AMCA Mk1.

CLSA says, “HAL is the most credible play on aerospace engines in India with its US$3bn+ in engine orders, a pipeline of 350+ jet engines, a decadal MRO opportunity and it won India’s biggest export order from Safran.”

The brokerage also highlights the company’s broader opportunity in aerospace engines, including exports and maintenance, repair and overhaul.

CLSA on Bharat Electronics: ‘Outperform’

Bharat Electronics has the highest potential upside among the three stocks. CLSA has an ‘Outperform’ rating and a target price of Rs 522, implying 27.1% upside.

The fighter-engine opportunity is part of a wider push towards domestic defence manufacturing and greater participation by Indian companies in advanced military programmes. CLSA continues to include Bharat Electronics among its preferred listed defence names.

The broader opportunity is not limited to engines themselves. As India moves towards more indigenous development of fighter platforms and their systems, the ecosystem around advanced defence manufacturing is also expected to expand.

CLSA on Larsen & Toubro: ‘Outperform’

Larsen & Toubro carries an ‘Outperform’ rating from CLSA, with a target price of Rs 4,842, implying 19.2% upside.

The company is among the private-sector players gaining access to larger and more advanced defence programmes. CLSA notes that new players, including Larsen & Toubro and Bharat Electronics, are allowed to bid for fifth-generation fighter programmes.

That could become increasingly relevant as India seeks to build a larger domestic ecosystem around next-generation aircraft and engines.

Safran gets AMCA Mk2 engine opportunity

The biggest development in CLSA’s report is Safran’s selection for the 120 kilonewton engine research and development contract for the AMCA Mk2.

The brokerage says the French company offered to develop a fifth-generation fighter engine with the intellectual property resting in India. Safran proposed a 10-year development cycle, with availability targeted by 2038.

CLSA says the delay in General Electric’s technology transfer created the opening.

“GE’s transfer tech delay opened the window which Safran seized,” the brokerage said.

Rolls-Royce initially had a longer development schedule, but CLSA says it subsequently matched the final proposal with core testing by 2030 and production by 2036.

Rolls-Royce-Reliance enters the picture

Rolls-Royce has now joined hands with Reliance Industries to explore an aerospace gas-turbine engine hub in India.

CLSA says the partnership is intended to explore the design, development, manufacturing and delivery of a “sovereign indigenous combat engine” for the AMCA programme.

The proposal adds another potential route for India’s fighter-engine ambitions, even as Safran moves ahead with the AMCA Mk2 engine research and development programme.

CLSA also mentions a Safran-GTRE joint venture proposal for a 120 kilonewton-class engine, reportedly valued at approximately$7 billion, which was before the Cabinet Committee on Security for approval at the time of the report.

Why the fighter-engine opportunity matters

The engine opportunity is particularly important because India’s next generation of fighter aircraft requires greater domestic control over critical technologies.

CLSA says the government has already awarded$17 billion of Make in India contracts for fighter jets, engines and helicopters, with more awards expected. The brokerage sees the fighter and helicopter engine market as a major opportunity for India.

For Hindustan Aeronautics, the opportunity is more immediate because of its existing engine manufacturing and maintenance capabilities. Bharat Electronics and Larsen & Toubro offer exposure through the wider defence ecosystem and their participation in increasingly sophisticated defence programmes.

HAL vs BEL vs L&T: What the numbers show

The three stocks carry the same CLSA rating, but their target-price potential differs.

Bharat Electronics has the highest upside at 27.1%, while Larsen & Toubro has 19.2% and Hindustan Aeronautics has 9%.

At the same time, the nature of their exposure is different. Hindustan Aeronautics is the most direct listed play on aircraft and engines, while Bharat Electronics and Larsen & Toubro are positioned to participate in the broader expansion of India’s defence manufacturing ecosystem.

Conclusion

India’s fighter-engine opportunity is becoming more competitive. Safran has moved ahead with the AMCA Mk2 engine research and development programme, while Rolls-Royce and Reliance are exploring an India-based aerospace gas-turbine engine hub.

The bigger question now is how much of India’s next-generation fighter-engine value chain can ultimately be localised, and which Indian companies emerge as the key beneficiaries as global engine makers seek domestic partnerships.

Disclaimer: This article is based on CLSA’s Defence Make in India #10 report dated August 17, 2026. The ratings, target prices, estimates, forecasts and views cited are those of CLSA and are presented for news-reporting and informational purposes only. They do not constitute investment advice or a recommendation to buy, sell or hold any security. Brokerage estimates and target prices may change and may not materialise. Investors should conduct their own research and consult a SEBI-registered financial adviser before making investment decisions.