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IdeaForge Technology IPO: 5 Things to Know

Jun 21, 2023

IdeaForge Technology IPO: 5 Things to Know

Editor's note: Last year, Droneacharya Aerial Innovation went live with its initial public offer (IPO). The stock received massive response at the time of subscription and even after if listed on the bourses.

The stock continues to be on investors' radar as currently, that's the only pure play drone company listed on the exchanges. This is all set to change as one more drone company will get listed soon - IdeaForge Technology.

The drone company filed its draft red herring prospectus with the market regulator in February 2023.

After a long wait, the company is finally set to go live with its IPO next week.

The IPO of IdeaForge Technology will open on 26 June 2023. Unlike Droneacharya Aerial Innovation which got listed on the SME platform, IdeaForge will get listed on the mainboard section.

Here are the key details about the IPO:

IdeaForge Technology IPO: 5 Things to Know

Indian blockbuster movie starring Aamir Khan - 3 Idiots - brought focus on an important invention: drones.

What's interesting, the drone used in the movie was manufactured by a Mumbai-based company - IdeaForge Technology.

The skies are about to change in India with the launch of the country's first mainboard drone company's Initial Public Offering (IPO).

This ambitious venture is set to revolutionise the drone manufacturing industry, bringing cutting-edge technology and innovation to the forefront.

Let us find out important details about India's first mainboard drone company's IPO.

#1 About IdeaForge Technology

Founded in 2007 by IIT Bombay alumni Ankit Mehta, Rahul Singh, Ashish Bhat, and Vipul Joshi, IdeaForge Technology is engaged in the security operations segment as the first India-based organisation to develop and manufacture vertical take-off and landing (VTOL) UAVs.

In addition to the US, IdeaForge has also expanded beyond India to Oman, Nigeria, and Bhutan.

The Mumbai-based company makes drones for India's armed forces, police and homeland security as well as industrial applications.

IdeaForge has a license from the Ministry of Defence to manufacture unmanned aerial vehicles (UAVs).

#2 Backed by Marquee Investors

In August 2022, the company had a Series B funding round.

In the series B round, the company raised US$ 20 million (m). The investment was led by Florintree, a company led by Mathew Cyriac, the former private equity co-head of Blackstone India.

The round also saw participation from the company's existing investors Celesta, a prominent technology investment fund, Infosys, Qualcomm and Infina, along with the Exim Bank of India.

#3 IPO details

Issue period: 26 June 2023 to 29 June 2023

Type of issue: Fresh issue worth Rs 2,400 million (m) and offer for sale (OFS) worth Rs 3,270 m

Price band: Rs 638 to Rs 672 per share

Face value: Rs 10 per equity share

Lot size: 22 shares

Application limit: Minimum one lot and maximum thirteen lots for retail investors

The company has reserved not less than 75% shares of the offer for qualified institutional buyers (QIB). It has reserved not less than 15% for non-institutional buyers (HNI). Hence not more than 10% of shares are available for retail individual investors.

Tentative IPO allotment date: 4 July 2023

Tentative listing date: 7 July 2023

Reportedly, the company was set to raise about Rs 7.5 billion (bn) through an initial public offer (IPO). However, the IPO size was reduced as the company made a private placement of shares at a valuation of about Rs 25 bn.

The proceeds of the proposed IPO would be used to pare debt and for working capital requirements and product development.

#4 Notable mentions of ideaForge including its financial performance

According to the company's draft red herring prospectus, here are the company's noteworthy establishments:

During the 2015 earthquake, ideaForge drones were used for site monitoring in Kathmandu, Nepal, and other locations to aid with the search and rescue activities.

During a terrorist incident in Pampore in 2016, these drones were able to deliver crucial intelligence by revealing the precise locations of the terrorists.

Further, ideaForge's Ninja drones were utilised to curb theft and pilferage cases with the company's partnership with railways to boost their surveillance operations.

It is clear from the financial statements of the company that its revenue and profit have seen a meteoric rise as then drone company moved out from the pandemic-led bloom.

As the economy normalized, the company's financial performance came down from its previous high but it maintained a sustainable growth rate in financial year 2023.

The company's revenues grew by 16.7% in the financial year 2023 driven by rising demand for unmanned aerial vehicles.

However, the rise in revenue was negated by the rise in expenses. The profit margin of the company contracted by 10.4% in the financial year under consideration.

IdeaForge Financial Snapshot (2021-2023)

Particulars 31-Mar-23 31-Mar-22 31-Mar-21
Revenues (Rs in m) 1,860.10 1,594.40 347.2
Revenue Growth (%) 16.70% 359.20%  
Expenditure Before Tax 1,556.10 1,112.70 508.4
% of Total Income 83.7 69.8 146.4
Net Profit 319.9 440.1 -146.3
Net Profit Margin (%) 17.2 27.6 -42.1
Net Worth 3,247.20 1,633.00 597.5
Return on Net Worth (%) 9.9 27 -24.5
Basic Earnings per share (Rs) 8.6 13.8 -5
Data Source: Company's Red Herring Prospectus (RHP)

#5 Arguments in favour and against IdeaForge Technology

Points in favour of the company

  • The company has a first-mover advantage. It is a pioneer and the pre-eminent market leader in the Indian UAS market, with a market share of approximately 50% in the financial year 2022.
  • It has a diversified product portfolio with a robust technology stack and track record of successful outcomes in critical use cases which were mentioned above.
  • The company has a diverse customer base with a long-standing relationship with its customers. It received significant repeat orders in the last two financial years.
  • The company runs a strong in-house research and development (R&D) effort. Its in-house product development centre allows the company to design, develop and engineer its UAVs in line with the needs of its customers.

Point against the company

  • It operates in a capital-intensive industry. The business requires significant working capital in connection with its manufacturing of products, financing inventory and purchase of critical components which may be adversely affected in case there is any change in terms of credit or payment.
  • The company incurred negative cash flows in the financial year 2021 and 2020 primarily due to losses, investments in growth development activities, higher debt and longer cash flow cycles.
  • There can be no assurances that cash flows will be positive in the future thereby creating an adverse impact on the company’s ability to operate profitably.
  • The company is highly dependent on global vendors for the supply of components and may not be able to reduce its dependency on such imports.
  • If critical components or raw materials become scarce or unavailable, then it may incur delays in the manufacturing and delivery of products and in completing its development programs, which could damage its business.
  • The company is completely dependent on technology. If it fails to update its products with the dynamic technology it may become the next Nokia.

Investment Takeaway

The company has the largest operational deployment of indigenous UAVs across India.

Its customers have completed over 300,000 flights using the company's UAVs. ideaForge also ranked 7th globally in the dual-use category (civil and defence) drone manufacturers as per the report published by Drone Industry Insights in December 2022.

It appears the company has a strong presence in an emerging business. The timing of the IPO couldn't have been perfect as Indian markets have been on a food run.

While we know that Indian drone companies are the next investing theme, the market is quite volatile these days.

Diminishing investor appetite and volatile markets have pushed away companies from going public. In the past six months, 27 companies with IPO plans worth Rs 380 bn have allowed their regulatory approvals to lapse.

Similarly, the permissions to another nine firms planning to raise a total of Rs 150 bn are set to expire over the next two months.

It remains to be seen during what conditions the company decides to come out with its IPO.

But one thing is for sure...just like Tata Technologies IPO and Tata Electronics IPO, ideaForge's IPO will also witness a lot of traction.

Speaking of drones, according to co-head of Research at Equitymaster, Tanushree Banerjee, the drone sector could be one of the fastest-growing sectors of the stock market by 2030... and possibly even beyond.

If you're an investor, then you simply cannot ignore this sector today. Otherwise, you could be leaving a lot of money on the table.

Watch the below video to know more:

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

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