Opinion
India’s largest drone-maker is flying high
Summary
- By far the largest Indian pure-play drone manufacturer, Ideaforge Technologies looks set to soar with drones becoming ever more ubiquitous and useful
Shares of Ideaforge Technologies soared 93% on their public debut – appropriate enough for a company that manufactures drones. The stock fell by 10% on day 2 while investors who had been lucky enough to get an IPO allotment booked windfall profits. At around ₹1,270 (as of July 11), the stock is still up around 90% from its issue price of ₹672.
Part of the enthusiasm is undoubtedly due to a strong bull market. However, Ideaforge is a cutting-edge technology company – a market leader in unmanned aerial vehicles (UAV). Promoted by three entrepreneurs from IIT-Bombay, it makes a range of drones for civilian and defence use.
The company has a footprint across every common civil and military vertical except logistics. Apart from agricultural support, it offers mapping applications and is used extensively for defence, security and surveillance.
Ideaforge is by far the largest Indian pure-play drone manufacturer, and it’s profitable. In FY22 the company reported revenues of ₹160 crore, operating profits of ₹73 crore, and profit after tax of ₹44 crore. The IPO projections indicate it may register revenue of around ₹186 crore in FY23.
There’s a huge and expanding range of civilian and military applications and use-cases for drones. Capable of performing tasks in difficult terrain, they are safer than using humans in high-risk environments.
The global market for drones is expected to grow at a compound annual growth rate (CAGR) of 20%, from $21 billion in 2022 to $91 billion by 2030. Defence drones alone accounted for around $10 billion of the market in 2022. Although R&D for defence drives cutting-edge design, the civilian sector could grow even faster as more off-the-shelf uses are discovered. Passenger services and ambulance services are two possibilities.
Simultaneously, “counter-drone" applications for detecting UAVs and protecting installations are also growing quickly. Within a few years, the value of UAV software is expected to outpace the value of UAV hardware.
India’s drone policies and usage guidelines have been tweaked many times. There’s been a ban on drone imports since 2022, except for defence, security and R&D. This is partly for security reasons since drones can capture a lot of data. It is also supposedly meant to encourage the development of a domestic industry. The government has launched a production-linked incentive (PLI) scheme to encourage drone development and manufacturing, and restrictions on usage, exports and more have been eased.
The policy goal is to turn India into a global drone hub by 2030. Some 23 companies including Ideaforge have signed up to manufacture drones or their components under the PLI.
The Indian drone market is estimated to have a 2023 “potential" of around $2.7 billion, with defence the single largest contributor at $1.3 billion. Actual drone usage is much less, however, which indicates a big opportunity. India recently signed a $3.1 billion deal to procure MQ-9B ‘Reaper’ drones from the US.
Typical civilian uses include agricultural applications like crop-spraying, soil and crop testing and harvesting, logistics services (pizzas and medicines), weather-data collection, mapping (including of sewage systems and mining assays using ground-penetrating radar), planning alignment of roads, and power grids. Drones are also used to assess forest cover and to inspect bridges, railway tracks, solar panels, wind turbines, port facilities and more. Municipalities use drones to assess the size and use of real estate.
The covid pandemic saw drones used for contactless medical deliveries. They are also used extensively in disaster management. There are also everyday uses such as for journalism, photographing concerts, making movies, and so on. Drones can be used to spray tear gas, or be fitted with cameras and microphones for crowd control and surveillance. They have been widely used in anti-insurgency operations.
Their military uses are also diverse. It is impossible to conceive of a 21st-century conflict without drones. In the Ukraine war they have been used to deliver explosive payloads, spot targets for artillery, guard perimeters, gather intelligence, and for logistical support.
Drones were also used in the conflicts in Iraq, Yemen, Afghanistan, Syria, Azerbaijan and Armenia. During the Kargil War in 1999, India used drones for observations along the Line of Control, and both India and China have been using drones extensively along the Line of Actual Control. The Reaper drones that India is buying have been used for targeted assassinations. The US Air force is also developing drones that act in concert with manned aircraft.
But insurgents and terrorists also use drones. The Jammu airfield attack in June 2021 was carried out by drones and Yemeni rebels used drones to damage an oil refinery in Saudi Arabia.
Drones come in many shapes and sizes from tiny “nanos" (less than 250 g) to full-sized (over 150 kg), and carry varying payloads. Some are high-altitude or very-high altitude (there’s a class known as “pseudo satellites"). They can be long-range or long-endurance (capable of loitering for days). They may be fully autonomous or controlled by remote operators.
Apart from their physical design and fabrication, the software that powers UAVs also represents cutting-edge technology. As AI and edge computing technology develops, UAVs will become more sophisticated and capable. Ideaforge is well-placed to continue being the market leader, given its grasp of the technology and its ability to innovate.
