Ideaforge IPO: 6 things you need to know about the country's leading drone manufacturer

Ideaforge, the country's leading drone manufacturer, is set to launch its Initial Public Offering (IPO) on Monday, June 26. The IPO will remain open for subscription until Thursday, June 29.

The offering comprises a fresh issue of equity shares totaling Rs 240 crore and an offer-for-sale (OFS) of up to 48,69,712 equity shares. Qualified institutional buyers will have 75% of the total offer size reserved for them, while retail investors will have 10%, and non-institutional investors will have 15%.

The price band for the IPO has been fixed at Rs 638–672 per equity share, with a face value of Rs 10 each.

About the company

Ideaforge holds a significant market share of approximately 50% in the Indian unmanned aircraft systems ("UAS") market as of Fiscal 2022. The company boasts the largest operational deployment of indigenous drones across India, with an Ideaforge-manufactured drone taking off every five minutes on average for surveillance and mapping purposes, as per the company's DRHP report.

Founded in 2007 by Ankit Mehta, Rahul Singh, and Ashish Bhat, Ideaforge made early strides in the UAV market in India and became the first organization to indigenously develop and manufacture VTOL UAVs in 2009.

The company has collaborated with a Government of India entity to develop the NETRA UAVs, and it was also the first company to participate in the demonstration of 5G-enabled UAVs at the Indian Mobile Congress in 2018.

As of December 31, 2022, Ideaforge had the largest operational deployment of indigenous UAVs in India, with over 300,000 flights completed by its customers. The company was ranked 7th globally in the dual-use category (civil and defence) of drone manufacturers, as per the report published by Drone Industry Insights in December 2022.

Expansion plans and product portfolio

The company is currently catering to the requirements of the Indian market. India’s large market with diverse and challenging geographical terrains gives the company an opportunity to solve complex problems at scale.

In addition, the company also has a presence in Oman and the USA, and it is evaluating expansion opportunities in Bangladesh, Vietnam, and Nepal.

The company offers an extensive product portfolio targeting civil and defence applications. This includes hardware such as UAVs, payloads, batteries, chargers, and communication systems, as well as software and embedded sub-systems like GCS software for controlling and managing UAVs, autopilot sub-systems for remote control and autonomous flights, and industry-specific software solutions that enhance the value of their UAVs.

Moreover, Ideaforge aims to develop UAVs as an on-demand service solution, enabling operations in a pre-scheduled or ad hoc/on-demand manner at short notice.

All of Ideaforge's products are manufactured in-house at its facility located in Navi Mumbai, Maharashtra, India, according to company's DRHP report.

Strong relationships

The company primarily caters to customers with applications for surveillance, mapping, and surveying. While Ideaforge does not engage in long-term contracts with customers, they have established enduring relationships with certain clients. For instance, their first UAV was sold in 2010 to a state police department, and they have received repeat orders from them since then.

The company serves a diverse base of 265 customers as of December 31, 2022, including Indian defence customers and civil customers such as central armed police forces, state police departments, disaster management forces, forest departments, private contractors involved in smart cities projects, Pioneer Foundation Engineers Private Limited, and C.E. Info Systems Limited.

Objective of issue

The company aims to utilize the funds raised to repay or prepay certain indebtedness that the company has incurred. Secondly, a portion of the funds will be allocated towards funding the working capital requirements of the company.

Ideaforge plans to invest in product development to enhance its offerings and stay ahead in the competitive market. Additionally, the funds will be utilized for general purposes to support the overall growth and expansion plans of the company..

Financials

The company primarily derives its revenue from its defence segment, which accounts for a significant portion of its earnings. In the first two quarters of FY23, the company generated a revenue of Rs 1,261.62 million from this segment, while its Civil business generated a revenue of Rs 133.86 million.

During the same period, the company recorded a net profit of Rs. 452.12 million. In the fiscal year ending in 2022, the net profit stood at Rs. 440 million. The company experienced net losses of Rs 146 million in FY21 and Rs 134 million in FY20.

Key risks

Ideaforge, in its DRHP report, stated some of the following key risks:

The company said its business benefits from schemes launched by the GoI to boost the drone Industry. Any variation in such schemes, the company said, will have an adverse impact on their results of operations, financial condition, and cash flows.

"Our business is dependent on our single manufacturing facility, and we are subject to certain risks in our manufacturing process. Any slowdown or shutdown in our manufacturing operations could have an adverse effect on our business, financial condition, and results of operations. We may be unable to obtain and maintain our patent rights, thereby creating an adverse impact on our business and the results of our operations," the company added.

Further, the company also stated it is dependent on Promoters, Directors, other Key Managerial personnel, and Senior Management, including other employees with technical expertise. Any loss of or our inability to attract or retain such persons could adversely affect our business, results of operations, and financial condition, it added.

The company is heavily reliant on sales to the Indian government, including to the central and state government agencies. A decline in the government budget, reduction in orders, termination of existing contracts, delay of existing contracts, or any kind of adverse change in the Government of India's policies for our sector would have a material adverse impact on our business, the company stated.

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