IDEAFORGE

TECHNOLOGY LIMITED

IPO NOTE
OVERVIEW
IdeaForge Technology Limited incorporated in 2007, is a market leader in the Indian unmanned aircraft systems (UAS) market, with a
market share of ~50% in India (in terms of revenue) for FY22 (Source: 1Lattice Report). They primarily cater to domestic customers
across defense & civil sectors, for applications in surveillance, mapping and surveying. The product portfolio consists of hardware,
software & embedded systems and solutions. They have been granted 10 patents in India & 15 patents in other jurisdictions, as of
17th June 2023 and have filed another 41 patent applications, which comprise of 20 applications filed internationally & 21 patent
applications filed in India. They have a manufacturing facility located at Navi Mumbai, Maharashtra in India which spans ~21,000 sq.
ft. of licensed premises. As of 31st March 2023, the order book stood at ₹192 cr, out of which 96% was from government entities. As of
31st May 2023, the company had a total customer base of 265.
FINANCIAL HIGHLIGHTS ISSUE DETAILS
FY21 FY22 FY23 Issue Date 26 Jun’23 to 29 Jun’23

Revenue from Operations 35 159 186 Price Band ₹638-₹672

EBITDA (9) 75 57 Bid Lot 22
Net Profit (15) 44 32
Issue Size ₹567 cr
₹ crore
No. of Shares (Post Issue) 4.2 cr
ISSUE SIZE
Fresh Issue Post-Issue Implied Market Cap* ₹2,800 cr

Total ₹240 cr P/E Ratio

87.5x
(FY23)*
₹567 cr Offer For Sale * At upper price band
₹327 cr
IPO NOTE
ABOUT THE COMPANY
• Hardware - It primarily includes UAVs (Unmanned Aerial Vehicle), payloads, batteries, chargers and communication system. A brief
introduction to the products is given below:

Hardware Category Products Description

It is built for security and surveillance applications during day and

Ninja
night with swappable payloads.

It is a micro category survey-grade UAV & is equipped with an

Ryno advanced mapping payload and a state-of-the-art post processed
kinematic (PPK) module.

It is one of the most economical UAVs built with military grade

standards. It can be used for anti-terrorism, border security,
Q4i
intelligence, surveillance and reconnaissance (ISR) operations,
crime control and disaster management.

It is a small category UAV and used for surveying and mapping. Its
Q6 quadcopter design and high area coverage enables it to complete
large-scale mapping projects quicker than other UAVs.

IPO NOTE
ABOUT THE COMPANY

Hardware Category Products Description

It is mostly used for coastal patrol, anti – smuggling, search and

Netra V4+
rescue, disaster and emergency analysis.

It is used for long range, high endurance, high altitude last mile
Switch
surveillance and security operations.

It is built for use in a wide range of mission-critical applications. It

Netra V4 Pro is designed with quick snap fit mechanism without the
dependency on tools and built for repeated uses.

• Software & embedded sub-systems – This includes the GCS (Ground control station) software - BlueFire Touch which enables the
controlling and management for the UAVs & autopilot sub-system, which enables remote control and autonomous completion of
flights.
• Solutions – It enables industry/ application specific software that enhances the value of UAVs to the end customer. BlueFire
MapAssist, BlueFire Live!, Surveillance Pro and Geographic Information System (GIS) Pro are some of their solution softwares.

IPO NOTE
ABOUT THE COMPANY

• Its customers include Indian defense forces and civil customers comprising certain of the central armed police forces, state police
departments, disaster management forces, forest departments, private contractors in connection with smart cities, Pioneer Foundation
Engineers Private Limited and C.E. Info Systems Limited.

• As on 31st May 2023, they have onboarded ~100 channel partners and 3 national distributors. Some of these channel partners helped
them to expand their presence in the international market.

Revenue Mix for FY23 Segment Mix for FY23

10%
23%
Defense
Government of 21%
India Civil

Non Government Others

69%
77%

IPO NOTE
SECTOR OUTLOOK

• Drones have been used by armies all around the world for training, defense, surveillance operations and strikes on targets since the
1800s. The global drone industry is estimated to be $21.1 billion in CY22. The industry has witnessed a significant growth at a CAGR
of 19% over CY18-CY22.

• The United States has been working on creating a regulatory framework for drones for almost a century and is a global leader in
drones. Nations like Australia, UK and China have made it possible for businesses to use drones with minimal regulations

• The Indian drone hardware & software market is estimated to be $43 million in FY22. Major drivers behind drone industry growth
are industry favorable policies, increased demand for monitoring and surveying, cost-effective data collection, and introduction of
new use cases such as utilities & search and rescue operations.

• Back in the 1990s, the Indian Army acquired UAVs from Israel. First application was use as military drones during the 1999 Kargil
war for photo surveillance along the Line of Control (LOC).

• The key use of drones in India defense are surveillance, precision strikes and terrain mapping for scouting enemy troops. Indian
Army is encouraging companies to develop innovative concepts for introducing modern machinery.

• Agriculture, utilities and public safety are the most significant segments for enterprise drones. In agriculture, the key use cases for
drones are for spraying, seeding, crop monitoring and crop insurance.

Source: 1Lattice Report

IPO NOTE
SECTOR OUTLOOK

• With a growing number of inspection lines and towers, it will be impractical to maintain and examine them on such a big scale
manually thus drones will prove to be a beneficial alternative for inspecting towers / power lines at once and detecting errors within
the same in the utility industry. In Public safety, India law enforcement agencies like the police force, special forces, etc., are using
drones to monitor traffic, follow suspects and keep an eye on areas with high crime.

• SVAMITVA (Survey of Villages and Mapping with Improvised Technology in Village Areas) scheme seeks to enable village household
owners in inhabited areas with the "Record of Rights." The government aims to use drone technology for implementing SVAMITVA.
The scheme aims to cover 6.6 lakh villages in the country from FY21 to FY25. During FY21, the scheme was successfully launched in
the pilot states of Haryana, Karnataka, Madhya Pradesh, Maharashtra, Uttar Pradesh, Uttarakhand, Punjab, Rajasthan & Andhra
Pradesh in Phase 1. SVAMITVA Scheme was extended throughout the country from FY22.

• The PLI scheme, launched in September 2021, aims to incentivize Indian drone and drone components’ manufacturing companies,
to make them self-sustaining and globally competitive. With liberalized rules and the incentive scheme, the government expects the
drones and drone components manufacturing industry to attract investments from foreign investors. Under the scheme, a total
incentive of $15 mn is spread over three financial years.

Source: 1Lattice Report

IPO NOTE
COMPETITIVE LANDSCAPE

ASTRA MICROWAVE PRODUCT LIMITED

MTAR TECHNOLOGIES LIMITED

IDEAFORGE TECHNOLOGY LIMITED

DATA PATTERNS INDIA LIMITED

• Market Cap: • Market Cap: • Market Cap: • Market Cap:

₹10,089 cr ₹5,895 cr ₹3,501 cr ₹2,800 cr

• Revenue: • Revenue: • Revenue: • Revenue:

₹453 cr ₹574 cr ₹816 cr ₹186 cr

• EBITDA Margin: • EBITDA Margin: • EBITDA Margin: • EBITDA Margin:

37.9% 26.8% 18.1% 30.9%

• PAT Margin: • PAT Margin: • PAT Margin: • PAT Margin:

27.4% 18.0% 8.9% 17.2%

• P/E: • P/E: • P/E: • P/E:

81.4x 57.2x 50.1x 87.5x

Figures are for FY23

IPO NOTE
OBJECT OF THE OFFER
The company proposes to utilize the net proceeds towards funding the following objects:

• Repayment/prepayment of certain indebtedness availed by the company.

• Funding working capital gap.
• Investment in product development.
• General corporate purposes.
PROPOSED UTILISATION OF NET PROCEEDS
Estimated Utilization of Net Proceeds
Total estimated cost/ Estimated (₹ in Cr)
Particulars utilization from Net Proceeds
(₹ in Cr)
FY24 FY25
Repayment/prepayment of certain indebtedness
50 50 -
availed by the company
Funding working capital gap 135 85 50

Investment in product development 40 20 20

General corporate purposes

Total 225 155 70
To be determined

IPO NOTE
PROMOTER BACKGROUND AND SHAREHOLDING

The promoters of the company hold 34% stake in the company. Shareholding Pre IPO Post IPO
Srikanth Velamakanni is the Chairman and Independent Promoter Group 34% 30%
Director of the company. Public 66% 70%
Ankit Mehta is the CEO and Whole Time Director of the Total 100% 100%
company. He has been associated with the company since its
incorporation and has experience in the drone industry. He is Share in Issue
responsible for driving business growth, strategy, global Allocation of offer % of Issue
(₹ crore)
expansion and investor relations.
QIB 425 75%
NIB 85 15%
Retail 57 10%
Total 567 100%

Major Selling Shareholders Shareholding % Pre Issue Shareholding % Post Issue % of OFS Issue
Indusage Technology Venture Fund I 6% 2% 35%
Celesta Capital II Mauritius 13% 9% 26%
Qualcomm Asia Pacific Pte. Ltd. 4% 1% 22%
Sujata Vemuri 3% 2% 4%

IPO NOTE
RISK FACTORS

• The company is heavily reliant on sales to the Indian government including central and state government agencies. The business
growth depends on the ability to qualify and win bids undertaken by the GoI entities for awarding contracts. The GoI awards
contracts on a competitive basis which have the potential to create pricing pressure which in turn exerts pressure on its margins. It
comprises of 96.3% of the total order book in FY23.

• The business requires significant working capital in connection with the manufacturing of products, financing inventory and
purchase of critical components which may be adversely affected by delays in payment under the existing contracts or reduction of
advance payments. The net working capital holding days of the company is lengthy. It stood at 301 days for FY23.

• The company partially import certain of components such as carbon fibre tubes, landing gear, propellors, motors and antennas
required for manufacturing UAVs. The imports was at ₹48 cr in FY23.

• It operates in an industry which is highly regulated and is subject to change. It will be adversely affected if it fails to comply with the
applicable regulations and rules prescribed by the Government of India.

• The company has a very concentrated customer base. In FY23, one of its customers contributed ~67% to the total revenue.

IPO NOTE
 STATEMENT OF PROFIT AND LOSS

Particulars Data for the period (₹ crore)

2021 2022 2023
Revenue From Operations 35 159 186
Other Income 2 2 10
Total Income (I) 36 161 196
Cost of raw materials and components consumed 22 51 96
Changes in inventories (4) (10) (37)
Employee Benefits Expense 19 27 51
Finance Costs 2 18 5
Depreciation and Amortization Expense 4 7 12
Other Expenses 8 18 29
Total Expenses (II) 51 111 156
Profit Before Tax (III) = (I-II) (15) 50 41
Total Tax Expense (IV) 0 6 9
Net Profit for the Period (III-IV) (15) 44 32

IPO NOTE
 STATEMENT OF ASSETS AND LIABILITIES

Particulars Data as on 31st March (₹ crore)

2021 2022 2023
Property, plant and equipment 1 2 12
Right -of- use Assets 1 11 16
Intangible assets 26 32 46
Other non-current assets 15 33 31
Inventories 23 49 105
Trade Receivables 24 20 58
Bank Balance and Cash & Cash Equivalents 14 35 6
Other Current Assets 20 39 215
Total assets 124 222 488
Total Equity 60 163 325
Non-Current Liabilities 2 12 14
Total Borrowings 51 6 87
Trade payables 5 7 14
Other current liabilities 6 33 46
Total Equity and liabilities 124 222 488

IPO NOTE
STATEMENT OF CASH FLOW

Particulars Data for the year ended 31st March (₹ crore)

2021 2022 2023

Net cash generated from / (used in) operating activities (A) (31) 67 (53)

Net cash generated from / (used in) investing activities (B) (7) (31) (149)

Net cash generated from / (used in) financing activities (C) 43 (11) 176

Net increase / (decrease) in cash and cash equivalents (A+B+C) 5 25 (26)

IPO NOTE
KEY METRICS
Particulars Data for the year ended 31st March

2021 2022 2023

EBITDA (₹ cr) (9) 75 57
EBITDA margin (%) (26.7) 47.1 30.9
Profit/(loss) after tax (₹ cr) (15) 44 32
PAT margin (%) (42.1) 27.6 17.2
ROCE (%) (15.2) 49.6 12.5
ROE (%) (22.9) 39.5 13.1
Order book (in ₹ cr) 136 311 192

IPO NOTE
FUTURE OUTLOOK

• The company is currently present in Oman & USA and are evaluating further expansion in Bangladesh, Vietnam, and Nepal. They will
further expand their presence in the United States as well.

• They are in the process of developing a DraaS (drone as a service) model which will allow the drones to be deployed in several
locations.

• The company is planning to introduce newer versions of UAVs such as NETRA, SWITCH, and Q6, wherein they will be focusing on
improving the performance by providing increased flight times which can be achieved by better airframe designs, better battery
technology and overall better integration of the different subsystems.

IPO NOTE
SWOT ANALYSIS

• Ideaforge is the pioneer and the pre-eminent market leader in

Strengths Opportunities the Indian UAS market, however, the industry is highly
Significant market Increasing drone dependent on government orders.
share adoption across
business verticals • It was the first company to indigenously develop and
PLI scheme and manufacture vertical take-off & landing UAVs in India in 2009,
initiatives by GoI hence, it has a first mover advantage.

• The industry is in a nascent stage and new order wins will be

critical. However, given the high growth possibilities, the rich
valuations are justifiable and investors with high risk appetite can
Threats Weakness contemplate investing.

Highly regulated Highly dependent on

government orders

IPO NOTE
TIMELINES

Finalization Credit of
of basis of shares to
Issue Opens allotment depository

26 29 4 5 6 7
Jun Jun Jul Jul Jul Jul

Issue closes Initiation of IPO Listing

refunds Date

Disclaimer:
This document is published for learning purposes only and nothing contained herein shall be
construed as a recommendation on any stock or sector.

IPO NOTE
Disclaimer
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CASE STUDY