What the ideaForge IPO Means for Infosys

The joke at a recent family wedding was that an innocuous drone kept coming between the bride and groom when they tried to exchange garlands.

Weddings in India are now incomplete without a drone or two hovering overhead to capture the special moments.

These unmanned aerial vehicles, or UAVs, now fly all over the place, lending a hand in everything from sports coverage and film shoots to disaster relief and border surveillance.

It started as a military experiment, with the Indian army importing drones from Israel in the 1990s and using them to monitor the Line of Control during the 1999 Kargil War against Pakistan. Drones today command an estimated US$ 43 m market.

In the movie 3 Idiots, the engineering student with the most promising project, was working on a drone. These small, unmanned flyers have captured the imagination of engineers for a while now.

Tiny drones at high altitudes may seem as innocent and cute as a flock of birds. But they have proven to be very useful in times of crisis.

For instance, they are used to search for stranded victims and drop food packets during natural disasters.

In happier times, the drones can simply serve ecommerce companies in delivering parcels.

But the use of drones, more recently, has been for potent national security concerns.

Just a few months prior to the India-China standoff at Galwan, many on social media were amused by the sight of the drone delivery at China's borders.

Global Times and other Chinese media showed a number of small 'quadcopter' drones, which take off and land vertically. They apparently carried containers of food that were dropped from a low height and handed over to soldiers.

Chinese drones have been reported to be surveying Indian positions in eastern Ladakh even as the stand-off around the Line of Actual Control (LAC) continues.

It's imperative that India catches up in the use of drones for assisting armed forces. Not just during periods of conflict but also for ensuring competent border surveillance in peaceful times.

Until 2016, India's R&D efforts for drones had suffered due to restrictions imposed by Missile Technology Control Regime (MTCR). This regime considers drones as weapons.

With India now a member of this cartel, it has better access to technologies and foreign partnerships.

With help from DRDO, several Indian companies are now venturing into drone manufacturing through joint ventures with foreign firms.

Today, drones are used in various industries...for delivering small items to conducting inspection, to monitoring crops, you name it, and drones can take up the task.

The use cases today seem endless as more and more industries discover ways that drones benefit their business.

The companies involved in mining sector are spending heavily to equip themselves with drones for regular business operations. Oil exploration companies plan to use drones to monitor pipelines for safe operations.

Agritech companies are making large investments to promote the use of drone technology in the agriculture sector to boost crop production.

Logistics companies can't rule out drones as they help deliver essentials including vaccines from one place to another in a short span.

Drones also help telecom companies maintain telecom towers and survey potential new tower locations.

These are just a few examples. Other industries have also deployed drones.

All this would not have been possible without the government's consistent support for the drone sector.

Drone Rules 2021 was a landmark regulation. It aim was to unshackle the bureaucratic regulations in the sector.

Then the centre announced the production-linked incentive (PLI) scheme for making drones. The PLI scheme for drones and drone components was allocated Rs 1.2 bn, spread over three financial years.

Following this, the government banned import of drones to promote domestic manufacturing in India.

One prominent startup in this space is ideaForge.

Founded in 2007, ideaForge has over 15 years of research and development (R&D) history. It has more than 20 global patents.

It dominates the segment of security and surveillance with a 90% market share.

The Indian military, Adani group, L&T, IOC, Survey of India, Indian Railways, among others are its notable customers.

The drone startup continues to ride high on growth prospects as it has a strong order book. Recently, it overtook competitors, Tata and Israeli defence contractors Aerospace Industries and Elbit, to receive a big order from the Indian army.

According to the company, one of ideaForge's drones takes off every six minutes, in the service of either the defence and security establishment or commercial users.

The interesting thing is that investors have had a chance to take a small exposure to this compelling unlisted drone startup right from 2016.

Back in 2016, Infosys had first invested in ideaForge to focus on unmanned aerial vehicle or UAV solutions (drones).

Five years later in 2021, Infosys made another investment of US$ 1 million or Rs 72 m in ideaForge.

Last year, ideaForge raised another US$ 20 m in a Series B funding round in which Infosys also participated.

Therefore, Infosys has been an indirect play on the opportunity in the drone sector all through.

Whether or not the upcoming ideaForge IPO is worth investing into is a discussion for another day.

Its competitor, Droneacharya Aerial Innovations, which listed late last year, has had a decent run on the bourses so far.

Meanwhile, I am all for indirect investments. They are safer to ride the asymmetrical payoffs of new disruptive tech businesses.

Warm regards,


Tanushree Banerjee
Editor, StockSelect
Equitymaster Agora Research Private Limited (Research Analyst)