Top 5 Drone Stocks to Watch Out for Multibagger Returns in 2025

The global drone market is experiencing a big boom, projected to reach US$ 54 billion (bn) by 2025 and potentially US $91.3 bn by 2030. This growth trajectory provides a strong tailwind for companies operating in this space.

India is actively positioning itself as a global leader in the drone industry, aiming to become a major drone hub by 2030. Government initiatives and a conducive regulatory environment back this ambition.

The Indian government's product linked incentive (PLI) scheme, launched in 2021, has already disbursed Rs 300 million (m) out of a total incentive pool of Rs 1,200 m, boosting the industry's growth.

Drones are finding increasing applications across various sectors, expanding the opportunity size. They are becoming indispensable tools for enhancing military capabilities, surveillance, and surveying.

Drones are also revolutionising agriculture through precision farming, enabling efficient crop monitoring, pesticide application, and soil analysis. Initiatives like the Kisan Drone Scheme further incentivise drone adoption in this sector.

When a sector shows so much potential, it makes sense to look at it deeply.

Keeping that in mind, here are 5 drone stocks to watch out for in 2025. These stocks may benefit from the booming market for drones.

These companies are filtered using Equitymaster's powerful stock screener and further based on their fundamentals, and strong growth plans for 2025.

Take a look...

#1 Zen Technologies

First on the list is Zen Technologies.

The company designs develops and manufactures combat training solutions and counter-drone solutions for defence and security forces.

It is actively involved in the indigenisation of technologies, which caters to Indian armed forces, state police forces, and paramilitary forces.

On the financials front, the company has shown 5-year sales compounded annual growth rate (CAGR) of 37% and a 3-year sales CAGR of 100%. Similarly net profit has grown at a CAGR of 257% over the last 3 years and 57% over the last 5 years.

Here's how the stock price has performed in the past 1 year.

Zen Technologies does not manufacture drones but is heavily involved in the anti-drone market. The company sees the anti-drone market as a key area for growth, both domestically and internationally.

The demand for anti-drone systems is increasing rapidly due to the growing threat posed by drones. Its anti-drone systems are designed to detect, track, and neutralise hostile drones using both soft-kill (jamming) and hard-kill (weapons) methods.

The company is investing in R&D to develop the next-gen anti-drone systems. It has partnered with companies like AI Turing Technologies to develop advanced components, such as the Hawkeye anti-drone system camera.

The company is also integrating anti-drone systems with other products, such as remote-controlled weapon stations (RCWS).

The company's management has consistently guided for a 50% CAGR in revenue from FY26 to FY28.

The total order book as on 30 September 2024 stands at Rs 9.5 bn.

The order inflow has been slow, but the management is confident the order inflow will start towards the third end quarter and the major orders will come in the fourth quarter.

The stock currently trades at a price to earnings (PE) ratio of 107x.

For more details, check out Zen Technologies' financial factsheet.

#2 RattanIndia Enterprises

Second on the list is RattanIndia Enterprises.

The company operates in various tech focussed new age businesses including e-commerce, electric vehicles, and drones.

Coming to financials, the company's sales have grown drastically to Rs 56.1 bn in FY24 from Rs 140 m in FY22.

But the profit margin of the company is low because a major portion of its revenue comes from its ecommerce business.

Also, many of the company's investments, such as drones and electric vehicles, are in relatively early stages of development. These businesses may take time to achieve profitability as they build market share.

RattanIndia aims to provide 360-degree drone solutions to customers with drones as a product (DAAP - drone hardware), drone as a service (DAAS - drone service solutions), and software as a service (SAAS - drone software).

Its drone business is conducted through its wholly-owned subsidiary, NeoSky India, and its step-down subsidiary, Throttle Aerospace Systems Private (TAS).

TAS is a market leader in enterprise, defence, and delivery drones. It was acquired by NeoSky on 24 May 2022 for Rs 200 m. TAS has made India's first DGCA-approved drone and has a license to make drones for the Ministry of Defence (MoD).

The company is working on a miniature drone for the consumer drone market.

Its enterprise drones excel in specialised tasks such as crowd monitoring, vehicle detection and classification, and Foreign Object Debris (FOD) detection.

These drones operate at an impressive frame rate of 30-45 FPS without extra load and achieve high accuracy levels of 90-95%.

In 2024, it deployed an autonomous drone surveillance solution to the Indian Army. The company has also launched an innovative, Made-in-India Anti-Drone - Defender. It can lock, track, and hunt down rogue drones which are entering unauthorised spaces.

RattanIndia has further entered the drone services market which covers categories like land mapping, infrastructure inspection, surveillance, logistics, and agriculture.

The L15 Cargo drone has been deployed to deliver essential supplies in flood-affected areas in Andhra Pradesh.

Here's how the stock price has performed in the past 1 year.

For more details on how its financials are shaping up, check out RattanIndia's financial factsheet.

#3 Paras Defence and Space Technologies

At number three comes Paras Defence and Space Technologies.

It's primarily engaged in the designing, developing, manufacturing, and testing of a variety of defence and space engineering products and solutions.

Paras Defence has recently forayed into drones. It has multiple subsidiaries dedicated to drone technology such as Paras Aerospace.

Coming to financials, the company has shown 5-year sales CAGR of 10% and a 3-year sales CAGR of 21%. Net profit has grown at a CAGR of 24% over a 3-year period and 10% over a 5-year period.

As of March 2024, the company's orderbook stood at Rs 6.3 bn.

It specializes in world-class radio frequency and microwave solutions, offering products such as jammers, software defined radios (SDRs), and detection systems to counter drone threats.

The company sees a large amount of future growth in the drone sector, particularly anti-drone technology. The global counter UAS (Unmanned Aircraft System) market was valued at over US$ 1.2 bn in 2023 and is projected to grow at a CAGR of 7% till 2034.

The company also owns a majority stake in Paras Green UAV, which focuses on agricultural drone technology.

Here's how the stock price has performed in the past 1 year.

For more details on its financials, check out Paras Defence's financial factsheet.

#4 IdeaForge Technology

Fourth on the list is IdeaForge Technology, an Indian company that designs, develops, and manufactures drones.

IdeaForge is a pioneer in the Indian drone industry and holds a 50% market share of the Unmanned Aircraft Systems (UAS). It's ranked 5th globally for drone manufacturing in the dual-use category (civil and defence).

In July 2023, the stock was listed at Rs 1,294 on exchanges with a 94% gain from its issue price of Rs 638-672 per share. But since then, the stock has crashed and has fallen below its IPO price.

Here's how the stock price has performed in the past 1 year.

The company has shown 5-year sales CAGR of 77% and a 3-year CAGR of 109% but the net profits have not grown at the same pace.

The operating margin has continuously fallen from a high of 47% in FY22 to 19% in FY24. The management has provided several reasons for this:

Competitive bidding: The company sometimes bids aggressively to secure large contracts, especially from government entities, accepting lower upfront gross margins.

During the Q4 FY24 earnings call, the management explained that some opportunities being billed during that period were closed close to a year back, and the gross margins were locked in at that time due to the competitive nature of the bids.

Investment in growth: IdeaForge is investing in areas like sales, marketing, and new systems to support future growth, leading to increased expenses that impact margins in the short term. The management emphasised during the Q1 FY24 earnings call that their quest for growth necessitates higher expenses, which reflects in the financials.

Product mix: The specific products and contracts executed in a particular period can significantly influence the overall margin, and this mix can fluctuate from quarter to quarter. The management highlighted in the Q1 FY24 earnings call that revenue and profitability depend on the product mix, but they did not disclose specifics.

By the end of Q2 FY25, the orderbook for the company stood at Rs 215 m with the L1 pipeline of over Rs 3 bn.

The L1 pipeline includes sizeable international opportunities. The management expects the current order book to be executed within the next two quarters.

The company has received seven new patents in areas like battery management, propulsion systems, and drone safety.

IdeaForge is investing heavily in R&D and capex for Make II programs, aimed at developing advanced drones with features like swarming and operating in challenging GPS-denied environments.

For more details on the company's financials, check out IdeaForge's financial factsheet.

#5 DCM Shriram Industries

Fifth on the list is DCM Shriram Industries. It is primarily engaged in production and sale of sugar, alcohol, power, chemicals, drones (UAV) and industrial fibers.

The major portion of the company's revenue comes from the sugar and chemical businesses.

DCM Shriram Industries has big plans for its industrial fiber and defence segments which manufactures and develops drones and anti-drone systems.

The company is looking to demerge and spin off 2 new entities. One will house its industrial fibre and defence business and the other the chemical business.

The demerger will allow each segment to grow and flourish with a singular focus on their business segment.

On the financials front, the company has shown a 5-year sales CAGR of 4% and a 3-year CAGR of 2%. Similarly net profit has grown at a CAGR of 21% over a 3-year period and 9% over a 5-year period.

Here's how the stock price has performed in the past 1 year.

DCM Shriram Industries has a 30% equity stake in Zyrone Dynamics (ZD), a Turkish company. In partnership with ZD, it is working to manufacture two variants of UAVs (Unmanned Aerial Vehicles).

In addition to the partnership with ZD, DCM has partnered with Skylock, an Israeli company, to manufacture counter drone systems in India. It has exclusive rights for manufacturing and marketing these systems in India.

DCM is aggressively pursuing sales of these defence products in India and abroad. The company has viable products in three verticals, including UAVs and Counter Drone Systems, to highlight to customers.

For more information, check out DCM Shriram Industries financial factsheet.

Snapshot of Drone Stocks on Equitymaster Stock Screener

Here's a list of companies involved in the drone ecosystem on Equitymaster's screener.

Conclusion

Investing in drone stocks requires a cautious approach despite the industry's potential for growth. While companies have displayed impressive performance, certain risks do exist in the sector.

Many companies heavily rely on government agencies for a significant portion of their revenue. Any shifts in government policies or budget allocations could severely impact their financial stability.

The industry is attracting numerous players, both domestically and internationally. This heightened competition could pressure profit margins and make it challenging for smaller companies to thrive.

Thorough due diligence, a long-term perspective, a focus on corporate governance, and a diversified portfolio are essential for mitigating these risks and potentially reaping the rewards of this emerging sector.

By the way, you can also check out the video version of this editorial on Equitymaster's YouTube channel.

Happy investing.

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