IdeaForge Technologies Ltd.

Forging the military strength of our nation.

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 TABLE OF CONTENTS
Summary 03

Company products 04

Products Sales and manufacturing facilities 05

Key Strengths 06

Key Growth Strategies 07

Risks and Concerns 08

Management Personnel and Issue Details 09

Financial Analysis 10

Disclaimer 11

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 NOT RATED

Forging the military strength of our nation.

IdeaForge Technology Limited ("ideaForge") was incorporated on February 8, 2007. Industry Defense
ideaForge is the pioneer and the pre-eminent market leader in the Indian
unmanned aircraft systems (“UAS”) market, with a market share of approximately Issue Details
50% in Fiscal 2022. IdeaForge ranked 7th globally in the dual-use category (civil and Listing BSE & NSE
defence) drone manufacturers as of December 2022. They have grown at a CAGR of Open Date 26th Jun 2023
137.47% in terms of revenue from operations over the last 3 Fiscals, with a Return Close Date 29th Jun 2023
on Capital Employed of 12.51% in Fiscal 2023. Price Band INR 638 - 672
Face Value INR 10
In addition to being among the 1st few players in India to enter the UAV market,
Market Lot 22 shares
ideaForge also has the distinction of being the 1st company to indigenously develop
Minimum Lot 1 Lot
and manufacture vertical take-off and landing (“VTOL”) UAVs in India in 2009.

Company’s product portfolio consists of: Issue Structure

Offer for Sale 42%
• Hardware, which primarily includes UAVs, payloads, batteries, chargers and Fresh Issue 58%
communication system (which enables communication between the Issue Size (Amt) INR 567 cr
ground control station and the UAVs), Issue Size (Shares) 84,41,763
QIB Share (%) ≤ 75%
• Software and embedded sub-systems, which includes the GCS software,
Non-Inst Share (%) ≥ 15%
which enables the controlling and management for their UAVs and
Retail Share (%) ≥ 10%
autopilot sub-system, which enables remote control and autonomous
Pre issue sh (nos) 38,098,559
completion of flights,
Post issue sh (nos) 41,670,611
• Solutions, which enables industry/application-specific software that Post issue M Cap INR 2,800 cr
enhances the value of their UAVs to the end customer.
Pre Post
Product development center: Shareholding (%)
(%) (%)
Promoter 28.39 25.58
The company possesses an in-house product development center that enables them
Promoter Group 32.50 18.41
to internally handle the design, development, engineering, and manufacturing of
Public 39.11 56.01
their UAVs, emphasizing performance, reliability, and autonomy. As of May 31,
TOTAL 100 100
2023, the product development center comprises 116 employees.

Key Financial Data (INR Cr, unless specified)

Adj EBITDA Net Adj EPS BVPS RoE RoIC P/E
Revenue EBITDA (X)
PAT (%) (%) (₹) (X) (%) (X)
FY20 14.7 (12.4) (13.4) (88.4) (96.0) (16.0) 81.2 (19.6) (28.4) (42.0)
FY21 34.7 (10.6) (14.6) (30.6) (42.1) (17.4) 71.6 (24.2) (15.8) (38.8)
FY22 159.4 74.6 44.0 46.8 27.6 52.4 145.1 36.1 56.2 12.8

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 Company Products:
Company’s product portfolio consists of:

• Hardware, which primarily includes UAVs, payloads, batteries, chargers and

communication system (which enables communication between the ground control
station and the UAVs),

• Software and embedded sub-systems, which includes the GCS software, which enables
the controlling and management for their UAVs and autopilot sub-system, which
enables remote control and autonomous completion of flights,

• Solutions, which enables industry/application-specific software that enhances the

value of their UAVs to the end customer.

Company Products

Source: Red Herring Prospectus

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 Product Sales
FY2023 FY2022 FY2021
Sales Revenue % of Revenue % of Revenue % of
(₹Cr) Total (₹Cr) Total (₹Cr) Total
Sale of products 163.6 88.0% 153.93 96.5% 31.01 89.3%
UAV 161.26 151.58 28.74
Spare Items 2.34 2.35 2.27
Sale of Services 4.97 2.7% 5.5 3.4% 3.7 10.7%
Maintenance Services 4.94 3.28 3.7
Training Services - 2.17 -
Others 0.03 0.05 -
Other Operating Revenues 17.43 9.4% 0.01 0.0% 0 0.0%
Performance Linked Incentives 17.42 - -
Duty drawback 0.01 0.01 -
Total 186.0 100.0% 159.4 100.0% 34.7 100.0%
Source: Company RHP
Revenue bifurcation
FY2023 FY2022 FY2021
Revenue % of Revenue % of Revenue % of
Sales (₹Cr) Total (₹Cr) Total (₹Cr) Total
Civil 40.0 23.7% 31.8 19.9% 29.9 86.1%
Defense 128.6 76.3% 127.7 80.1% 4.8 13.9%
Total 168.6 100.0% 159.4 100.0% 34.7 100.0%
Source: Company RHP

Customers:
As of May 31, 2023, there have been around 265 customers served by ideaForge. These
customers consist of Indian defense customers as well as civil customers, which include select
central armed police forces, state police departments, disaster management forces, forest
departments, private contractors involved in smart cities initiatives, Pioneer Foundation
Engineers Pvt Ltd, and C.E. Info Systems Ltd.

Manufacturing Facilities:
The manufacturing operations of the company are conducted at their facility located in Navi
Mumbai, Maharashtra. Spanning approximately 21,000 sq. ft., this facility is well-equipped with
state-of-the-art machinery, cutting-edge technology, and automated systems to facilitate the
production of a diverse range of products.

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 Capacity Utilization
Capacity Utilization
Products Installed capacity per day
2021 2022 2023
Quadcopter UAV 5 88% 93% 95%
Switch UAV 4 0% 75% 82%
Payload 15 79% 96% 95%
Battery 20 83% 84% 87%
Communication Box 15 88% 90% 90%
Source: IdeaForge Red Herring Prospectus

Key Strengths of the business:

1. Strong relationships with a diverse customer base:

➢ The growth ideaForge has achieved with their current products stems from their
ability to invent and deliver advanced customer centric solutions (i.e., hardware,
software, and solutions), to help them operate more effectively and efficiently. As
of May 31, 2023, they served a diverse base of 265 customers.

2. Strong management capabilities with a demonstrated track record of delivering

robust financial performance:
➢ The company is led by a qualified and experienced management team, who are
supported by a capable and motivated team of managers and other employees.
Their Promoters have knowledge and understanding of the drone industry in India
and involved in the strategic planning, operations, design and production
development, and have a cumulative work experience of more than 85 years.

3. In-House design to deliver capabilities:

➢ The company designs, develops, engineers, and manufactures their UAVs in-house
with a focus on performance, reliability and autonomy. Their own in-house product
development centre allows them to design, develop and engineer their UAVs in
line with the needs of their customers, which includes the software stack required
for their UAVs.

4. Strong management capabilities with a demonstrated track record of delivering

robust financial performance:
➢ The company is led by a qualified and experienced management team, who are
supported by a capable and motivated team of managers and other employees.
➢ Their Promoters have knowledge and understanding of the drone industry in India
and involved in the strategic planning, operations, design and production
development, and have a cumulative work experience of more than 85 years. Their
qualified and experienced team enables them to identify new avenues of growth
and helps them to implement their business strategies in an efficient manner.

5. Pioneer and the pre-eminent market leader in the Indian UAS industry, with first-
mover advantage:
➢ Their in-house capabilities for design, development, engineering, and
manufacturing have enabled them to develop better products based on the
evolving demands of their customers, thereby enhancing the customer
experience. They believe that their ability to build a fully integrated system and
have control over the full stack sets them apart from other players in the
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 market.
➢ They are driven by a self-propagating flywheel, leveraging their leadership
position and first-mover advantage to continuously improve user experiences
through customer insights and technological advancements. This allows them
to attract new customers and expand the range of use cases for their products.

Customer Strategy

Source: Red Herring Prospectus

Key Growth Strategies:

1. Expand the portfolio and cater to new end-use applications and industries:
➢ Drones are being explored extensively across various industries, including
construction, real estate, e-commerce, agriculture, utilities and energy,
financial services, and media and entertainment. The company intends to
leverage their in-house technology and their design and development
capabilities to innovate and introduce new UAVs to capture a higher wallet
share from new and existing customers.

2. Expand business services and software revenue through ‘as a Service’ offerings:
➢ ideaForge has the hardware and software capabilities to expand their business
services revenue by providing ‘drone as a service’ (“DraaS”) offerings. DraaS is
a ready-to-fly network of drones which allows users to schedule or request on-
demand flights, without the hassle of owning hardware, software, or trained
manpower.
3. Pursue strategic investment and acquisition opportunities:
➢ ideaForge intends to selectively pursue strategic investment and acquisition
opportunities that complement their growth strategy or strengthen or
establish their presence in their targeted domestic and overseas markets. As
the UAV industry presents significant growth opportunities, they intend to
utilize their capabilities and expand their business and operations by
pursuing investment opportunities in future. They may also form strategic
alliances with global and domestic players in various segments of the drone
industry that bring synergies to their business.
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 4. Strong relationships with a diverse customer base:
➢ The growth ideaForge has achieved with their current products stems from
their ability to invent and deliver advanced customer centric solutions (i.e.,
hardware, software, and solutions), to help them operate more effectively
and efficiently. As of May 31, 2023, they served a diverse base of 265
customers.

5. Pioneer and the pre-eminent market leader in the Indian UAS industry, with first-
mover advantage:
➢ ideaForge is the pioneer and the pre-eminent market leader in the Indian UAS
market, with a market share of approximately 50% in Fiscal 2022.
➢ In-house capabilities to design, develop, engineer and manufacture have
enabled them to develop better products basis evolving demands of their
customers, thereby enhancing customer experience with their products.
Their ability to build a fully integrated system and having control over the full
stack differentiates them from other players in the market.

Key Risks & Concerns

• Hacking of their software and solution or any other kind of cyber-attack could have a
material adverse effect on their business, results of operation, or financial condition.

• If they fail to effectively implement their production schedules or if their

manufacturing operations suffer unanticipated or prolonged interruption, their
business and results of operations may be materially and adversely affected.

• Their entry into the 'drone as a service' market may not be successful, and it might
adversely impact their financial condition.

• he competitive nature of their industry presents a significant challenge, as their ability

to effectively compete is crucial for sustaining a favorable business position, achieving
satisfactory results of operations, maintaining a healthy financial condition, and
ensuring strong cash flows.

• Any defects or thir inability to comply with quality parameters could potentially result
in the cancellation of existing and future orders, thereby posing a significant risk to
their reputation, business stability, cash flow, results of operations, and future
prospects. It is important for them to prioritize quality control measures and address
any potential issues to mitigate these risks and safeguard their financial performance
and market position.

• They may not be able to successfully develop new production processes and adopt
new original design manufacturing capabilities if they are unable to identify emerging
trends and are not able to predict customer preferences.

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 Management Team
Key Person Designation Details
He is the Chairman and Independent Director of the company and has been an
Srikanth Velamakanni Chairman Independent Director on the Board of the company since December 14, 2022. He
is associated with Fractal Analytics Pvt Ltd as the co-founder, group chief
executive and executive vice chairman.

He is the Chief Executive Officer and Whole-Time Director of the company. He is

CEO the Promoter of the company. He has been associated with the company since
Ankit Mehta
its incorporation and has experience in the drone industry.

He is the Chief Financial Officer of the company. He has been associated with the
company since October 21, 2008.
Vipul Joshi CFO

CS and Compliance She is the Company Secretary and Compliance Officer of the company and has
Sonam Gupta Officer been associated with the company since December 15, 2022.
Source: Company Reports

Issue Structure and Offer Details

The proposed fresh issue size of IFTL is INR 567 cr and the price band for the
issue is in therange of INR 638-672 and the bid lot is 22 shares and multiples
thereof.

Issue Structure
Investor Category Allocation No. of shares
offered
Institutional Not more than 75% of the Offer 6,321,490
Non-Institutional Not less than 15% of the Offer 1,264,308
Retail Individual Investors Not less than 10% of the Offer 842,865
Number of shares based on a higher price band of INR 672
Source: Red Herring Prospectus.

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 IFTL’s Financial Summary analysis
Fig in INR Cr (unless specified) FY20 FY21 FY22 Fig in INR Cr (unless specified) FY20 FY21 FY22
Income Statement Per share data & Yields
Revenue 14.0 34.7 159.4 Adjusted EPS (INR) (16.0) (17.4) 52.4
YoY Growth (%) 148.0 359.2 Adjusted Cash EPS (INR) (12.7) (13.1) 61.1
Raw Material Cost 6.5 18.3 41.2 Adjusted BVPS (INR) 81.2 71.6 145.1
RM Cost to Sales (%) 46.6 52.7 25.9 Adjusted CFO per share (INR) (19.5) (36.5) 79.2
Employee Cost 12.8 19.2 26.9 CFO Yield (%) (2.9) (5.4) 11.8
Employee Cost to Sales (%) 91.8 55.4 16.8 Adjusted FCF per share (INR) (29.6) (49.1) 39.6
Other Expenses 7.0 7.8 16.8 FCF Yield (%) (4.4) (7.3) 5.9
Other Exp to Sales (%) 50.0 22.4 10.5
EBITDA (12.4) (10.6) 74.6 Solvency Ratio (X)
Margin (%) (88.4) (30.6) 46.8 Total Debt to Equity 0.1 0.8 0.4
YoY Growth (%) (14.3) (802.6) Net Debt to Equity (0.2) 0.5 (0.0)
Depreciation & Amortization 2.8 3.6 7.3 Net Debt to EBITDA 1.2 (2.8) (0.0)
EBIT (15.2) (14.2) 67.3
Margin (%) (108.3) (40.9) 42.2 Return Ratios (%)
YoY Growth (%) (6.4) (574.0) Return on Equity (19.6) (24.2) 36.1
Other Income 2.3 1.6 2.0 Return on Capital Employed (20.6) (13.0) 34.7
Finance Cost 0.6 1.9 19.1 Return on Invested Capital (28.4) (15.8) 56.2
Interest Coverage (X) (25.1) (7.4) 3.5
Exceptional Item 0.0 0.0 0.0 Working Capital Ratios
PBT (13.4) (14.5) 50.2 Payable Days (Nos) 21 50 17
Margin (%) (96.0) (41.8) 31.5 Inventory Days (Nos) 283 246 112
YoY Growth (%) 7.9 (446.0) Receivable Days (Nos) 272 247 47
Tax Expense 0.0 0.1 6.2 Net Working Capital Days (Nos) 533 444 141
Tax Rate (%) (0.1) (0.8) 12.3 Net Working Capital to Sales (%) 146.1 121.6 38.7
PAT (13.4) (14.6) 44.0
Margin (%) (96.0) (42.1) 27.6 Valuation (X)
YoY Growth (%) 8.8 (400.9) P/E (42.0) (38.6) 12.8
Net Profit (13.4) (14.6) 44.0 EV/EBITDA (44.4) (56.0) 7.5
Margin (%) (96.0) (42.1) 27.6 EV/Sales 39.2 17.1 3.5
YoY Growth (%) 8.8 (400.9)
Cash Flow Statement
Balance Sheet PBT (13.4) (14.5) 50.2
Share Capital 0.1 0.1 0.1 Adjustments 0.4 5.6 42.1
Total Reserves 60.3 60.3 121.8 Change in Working Capital (3.4) (21.7) (19.6)
Shareholders Fund 68.5 60.4 121.9 Less: Tax Paid (0.0) (0.1) (6.2)
Long Term Borrowings 0.1 37.3 0.0 Cash Flow from Operations (16.5) (30.8) 66.5
Deferred Tax Assets / Liabilities 0.0 0.0 (1.6) Net Capital Expenditure (9.2) (9.0) (13.5)
Other Long Term Liabilities 0.1 0.0 0.0 Change in Investments 14.0 2.2 (17.3)
Long Term Trade Payables 0.0 0.0 0.0 Cash Flow from Investing 4.8 (6.8) (30.8)
Long Term Provisions 1.1 1.9 2.4 Change in Borrowings 1.8 44.7 8.5
Total Liabilities 69.7 99.7 122.7 Less: Finance Cost (0.6) (1.9) (19.1)
Net Block 3.6 12.6 15.5 Proceeds from Equity 0.0 0.0 0.0
Capital Work in Progress 0.0 0.0 0.0 Buyback of Shares 0.0 0.0 0.0
Intangible assets under development 16.8 14.2 19.1 Dividend Paid 0.0 0.0 0.0
Non Current Investments 0.0 0.0 0.0 Cash flow from Financing 1.2 42.8 (10.6)
Long Term Loans & Advances 1.4 1.4 0.6 Net Cash Flow (10.5) 5.2 25.2
Other Non Current Assets 9.6 13.6 29.6 Forex Effect 0.0 0.0 0.0
Net Current Assets 38.3 57.8 57.9 Opening Balance of Cash 5.1 0.1 5.3
Total Assets 69.7 99.7 122.7 Closing Balance of Cash 0.1 5.3 30.4

Source: Ventura Research

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