It depends. Is there going to be a majority stakeholder? Is it HAL or the private partner? If it's 50-50, then how will that work out?Au contraire it makes perfect sense. Think about how Titan was created from HMT.
Who's going to handle the manpower? Is it all going to be deputed from HAL or will the manpower be built up from scratch?
Will it act as an independent PSU or will it act like the private industry?
The fact is the IAF and ADA are trying to reduce the dependency on HAL as much as possible, but something else is in the works behind the scene. Who knows?