The Drone Stocks to Keep on Your Radar

Hello Viewers,

I have been looking at drone stocks for quite some time now.

While researching on the investment opportunities in drone space, I have come across some interesting news that I would like to share with you.

A missing mountain climber presumed dead after going missing on the world's 12th-highest peak, was rescued after being spotted by a drone.

A US military space drone landed at the Kennedy Space Center in Florida on after nearly two and a half years in orbit,

In September 2021, Telangana had successfully used drones to deliver COVID-19 vaccine. And soon, they could be used to deliver organs for transplant in a timely manner.

And a few days ago, Russian drones destroyed nearly 45 percent of self-propelled artillery guns from NATO since the beginning of the war in February 2022.

Production centres and factories are using drones to record temperature checks, monitoring production lines and spotting potential failures from the drone images.

While these are some niche uses, whether it is recording a wedding, tik tok videos or Instagraming your adventure trips, drones have infiltrated and swarmed the global landscape and skies.

From spreading fertilizers, seeds and pollination, to sending vaccines, delivering a regular parcel, surveillance measures, disease control , mining, disaster management and so on... drones have risen beyond a concept and imagination to become a part of regular life.

And yet, this is just the beginning for India.

The country aims to position itself as a global drone hub by 2030.

As per industry estimates, drones, also called Unmanned Aerial Vehicles (or UAVs), are expected to replace 80% of tasks that are presently carried out by manned aircraft.

Now as per Trade Promotion Council of India, India accounts for 22.5% of total global drone imports.

The liberalised policy for drones bans imported drone kits except for R&D, defence and security purpose.

It opens nearly 90% of Indian airspace as a green zone upto 400 feet for drones, and does away with pilot license requirements for non-commercial micro drones and nano drones,

And then there are PLI incentives that compensate for 20% of the value addition done by a company over next 3 years.

As per Civil Aviation Minister, you may soon see air taxis with drones weighing upto 500 kgs come under the ambit of new drone policy.

So, the drone market is at an inflection point, with high potential to explode. And it's a good time to keep a tab on the drone stocks.

The Civil Aviation Ministry expects domestic sector to hit revenue of Rs 120 to Rs 150 bn by 2026, from its current turnover of about Rs. 0.8m). That's a 150 times expansion.

And as per NITI Aayog estimates, the Indian market for UAV will be $50 billion over the next 15 years.

Even if we take these estimates with a fist of salt, the supernormal growth in drones is a given. So, let's take a look at listed companies that are participating in the drone revolution.

The first is RattanIndia Enterprises. The company is making a dent in the almost all new age industries you can think of - EV, Fintech, in ecommerce and ....

Drones.

Its wholly owned subsidiary Neosky India Ltd has both drones as a service and drones as a product under its portfolio. Neosky has also 60% stake in Bangalore based Throttle Aerspace Systems. It is India's first DGCA approved drone maker for civil drones. It also has Ministry of Defence license to make military grade drones and is a market leader in enterprise, defence and delivery drones. The company was shortlisted for PLI scheme as well.

Here's is the most interesting part. Neosky is coming up with consumer drones that could be used for filmography - from capturing travel videos, weddings, wildlife, and so on, a booming market in the digital age. It is also making 70% indigenously built anti drones that are used to neutralize drones that go out of control or enemy drones.

The company has earmarked Rs 100 crore for the drone segment. It has also invested in Matternet, a US based global leader in drone logistics. Matternet is the company that launched world's longest drone delivery route in Switzerland. And it is offering services in medical delivery.

Past historical performance of RattanIndia does not inspire much confidence, but it is indeed a stock to keep in your drone stock watchlist.

The second is Zen Technologies, a market leader in manufacturing defence training solutions with over 95% market share in tank simulators. Ministry of Defense is its key customer. The company offers global defence training through live and virtual simulations for armed forces, security forces and paramilitary forces, and develops drones and anti-drone solutions for enemy drones. Zen Technologies expects new products such as heavy lift logistics drones and anti-drone solutions to contribute significantly to its revenues and profitability in the coming years.

The company has reported revenue of Rs 151 crore in the trailing 12 months. And the latest order book is at Rs 404 crore. The debt-to-equity ratio is less than 0.1 times.

With strong R&D investments, the company claims of strong Intellectual Property (IP) and has filed for more than 112 patents, of which 27 have been granted.

Other defense players that are exploring drone opportunity include Bharat Electronics and Paras Defense.

Bharat Electronics has signed an MoU with Dronedek Corporation in the US and is focusing on anti-drones' segment as well.

Paras Defence and Space Technologies Ltd is foraying into drone and anti-drones via its two subsidiaries. One of these subsidiaries - Paras Aerospace with 60% stake has been shortlisted for PLI schemes. The company is planning to upgrade its manufacturing facilities to forward integrate into the aerospace sector by developing and partnering with OEMs in the Drone Technology domain.

These are some other companies that have invested in drone startups.

While the investments may look very small given the size of these companies, it would be interesting if any of these startups could turn out to be what Zomato became for Info Edge.

It is worth mentioning here that Ideaforge in which Infosys has invested is India's largest dronemaker with 50% market share in unmanned aircraft system and has applications in surveillance, mapping and surveying. It ranks 7th globally in dual category, i.e, both civil and defense.

I would like to add a disclaimer here to not consider any of the names mentioned or discussed above as recommendations. These are just the stocks to be added to your drone stock watchlist.

For more such stocks in the drone space, do check the drone stocks screener link below the video.

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Thanks for watching. Goodbye.