How You Can Unlock the Profit Potential in Indian Drone Stocks

Drones are in news for all the wrong reasons these days. They are the new weapons of destruction.

A few days ago, Russia made an astonishing statement. It said its Lancet-3 kamikaze drones destroyed nearly 45% of towed and self-propelled artillery guns from North Atlantic Treaty Organization (NATO) since the beginning of the war in Ukraine February 2022.

The notoriety of drones is not limited to the Russia Ukraine war.

China is in news for working on a kamikaze drone that could be launched underwater, amid mounting tensions with Taiwan.

But then there are good use cases too. Check these out...

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 Saturday after nearly two and a half years in orbit. As space exploration becomes the next obsession amid global superpowers, drones offer a low-cost access to space.

It was through drones that the Telangana government successfully delivered COVID-19 vaccines in the year 2021. Soon, they could be used to deliver organs for transplant in a timely manner.

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

Its even more productive use cases include spreading fertilisers, seeds and pollination, to sending vaccines, delivering a regular packages, as well as a surveillance tool for disease control, mining operations, disaster management and so on.

These were some B2B use cases. But drones are in huge demand from the public too.

You could easily spot them in weddings (for recording), with teenagers for making Tik Tok and Instagram reels. Indeed, drones have infiltrated and swarmed the land and the skies.

They have flown beyond the concept and imagination stage to become ubiquitous and a part of our day to day lives.

And yet, this is just the beginning for India. The country aims to position itself as a global drone hub by 2030.

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 purposes.

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.

You may soon see air taxis with drones weighing upto 500 kgs come under the ambit of new drone policy.

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

The Civil Aviation Ministry expects the domestic sector to achieve revenue of Rs 120-150 bn by 2026, from the current Rs 0.8 m. That's a 150 times expansion.

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

Even if we take these estimates with a pinch 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.

Take for instance RattanIndia Enterprises. The company is making a dent in the almost all new age industries you can think of - EVs, Fintech, 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 Aerospace Systems. It's 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.

And 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's also making 70% indigenously built anti-drones that are used to neutralise drones that go out of control or enemy drones.

The company has earmarked Rs 1 bn 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's also offering services in medical delivery.

The historical performance of RattanIndia does not inspire much confidence but it's indeed a stock to keep in your drone stock watchlist.

Other defense players that are exploring drone opportunity include Zen Technologies, 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.

And there are some indirect plays. These are listed non-drone 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.

One that deserves special mention is Ideaforge in which Infosys has invested is India's largest dronemaker with 50% market share in unmanned aircraft systems with applications in surveillance, mapping, and surveying. It ranks 7th globally in the 'dual' category, i.e., both civil and defense.

Do check out my videos to know more about drone stocks.

If you are keen on riding this megatrend, it's high time to start adding these names to your watchlist. In case you need a readymade list, do check our drone stocks screener.

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Warm regards,


Richa Agarwal
Editor and Research Analyst, Hidden Treasure
Equitymaster Agora Research Private Limited (Research Analyst)