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Ideaforge Technology IPO entails to raise ₹567 crore through a mix of fresh share offer of ₹240 crore and offer for sale (OFS) component of ₹327 crore. The shares are being Offred ₹672 at the upper end of price band. The overall size of the company IPO will entail the issue of 84,41,141 shares. ideaForge Technology Limited is engaged in the business of manufacturing Unmanned Aircraft Systems (UAS). The company manufactures Unmanned Aircraft Vehicles for Mapping, Security & Surveillance.

About ideaForge Technology:

• Ideaforge Technology was Incorporated in 2007 to engage in the business of manufacturing Unmanned Aircraft Systems (UAS).
• UAS or drones are used extensively from mapping to army operations, for minerals prospecting and delivery operations.
• Ideaforge Technology Ltd manufactures UAS in different classes for Mapping, Security & Surveillance.
• Drones are used by the Indian defence forces and the Border Security Forces in conducting Intelligence, Surveillance, and Reconnaissance operations along the borders as well as in mining area planning, mapping applications, real estate businesses etc.
• 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.
• ideaForge Technology operates through two principal software products BlueFire Live and BlueFire Touch.
  • BlueFire Live enables secure and live streaming of UAV video feed as well as exercising remote payload control.
  • BlueFire Touch is a Ground Control Software (GCS) to plan and command mapping and surveillance missions as well as identifying target locations through waypoint based navigation.
• ideaForge has a broad range of products with feature based differentiation such as weight class (approx 2-7 kg), endurance class (25-120 minutes flying time), take-off altitude range (up to 6,000 meters), communication range (approximately 2-15 km), payload types, etc.
• These UAVs are deployed in multiple use cases across defence and civil sectors. Further, these UAVs can be modified to address construction, infrastructure, retail, agriculture, and delivery applications.
• ideaForge Technology product development centre is located at Navi Mumbai and has116 employees in the product development team, as of May 31, 2023.
• Promoters are Ankit Mehta, Rahul Singh and Ashish Bhat. All have IIT-B background.

Anchor Investors:

THe Anchor issue got a good response. Prominent names include:

ideaForge Technology IPO: Financials

ideaForge Technology IPO: Salient Points

• Promoters holding is 34% at present and shall stand at 30% post IPO.
• Due to OFS and IPO , investors Indusage holding will drip from 6% to 1.4%, Celesta from 3% to 9%, Qualcom from 3.6% to 0.8% etc.
• As there was loss in FY21, Only 10% issue is for retail,
• From the Rs. 240 cr fresh issue: working capital (Rs. 135 cr), debt repayment (Rs. 50 cr ), product development (Rs. 40 cr).
• In June 7, 2023, company carried out Pre IPO placement of 178,515 Equity Shares to 360 ONE Special Opportunities Fund – Series 9 (earlier, IIFL Special Opportunities Fund – Series 9), 44,700 Equity Shares were allotted to 360 ONE Special Opportunities Fund – Series 10 (earlier, IIFL Special Opportunities Fund –Series 10), 223,214 Equity Shares were allotted to TATA AIG General Insurance Company Limited, 223,214 Equity Shares were allotted to Think Investments PCC and 223,214 Equity Shares were allotted to Motilal Oswal Midcap Fund.
• first company to indigenously develop and manufacture vertical take-off and landing (VTOL) UAVs in India in 2009.
• It is also the first company to participate in the demonstration of 5G enabled UAVs at the Indian Mobile Congress in 2018.

ideaForge Technology: Assessment

• Covid brought spotlight on use of Drones for civil purpose. The Ukraine Russia war further showed their growing importance in armed conflicts.
• Indian market for drones is projected to grow as high as 80% CAGR till FY 2027,
• Strong Player in a Sun-rise Industry.
• Company is a pioneer and market leader in the Indian unmanned aircraft systems (“UAS”) market, with a market share of approximately 50% in Fiscal 2022.
• As of 31.3.23, Defence sector accounted for 70% of its FY23 revenue, and about 95% of its Rs. 192 cr. order book.
• The sector is a beneficiary of Government’s PLI scheme.
• ideaForge has raised funding from various investors including Infosys Ltd, Qualcomm Asia Pacific Pte. Ltd., Celesta Capital II Mauritius, Celesta Capital II-B Mauritius, Florintree Enterprise LLP, Export Import Bank of India and Infina.
• The Directorate General of Foreign Trade (“DGFT”) by way of notification in February 2022, modified the Indian Trade Classification (Harmonised System) 2022 Schedule-1 (Import Policy) and banned the import of drones in completely-built-up (“CBU”), semi-knocked-down (“SKD”) or completely-knocked-down (“CKD”) form, with some exceptions. This has given a boost to Indian Drone Industry.
• The company has a lengthy working capital cycle of about 300 days.
• It is heavily reliant on sales to the Indian government including to the central and state government agencies.
• Company is entering ‘Drone as a service’ (“DraaS”) sector which 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.
• The company has availed Fund based (working capital) and non-fund based sanctions from HDFC Bank, Axis Bank and Export-Import Bank of India.
• It is one of the few original equipment manufacturers (“OEMs”) globally to have its own proprietary autopilot sub-system and ground control software.
• As a result of its continuous product development and innovation efforts, ideaForge Technology has filed 41 patent applications, which comprise of 20 applications filed internationally and 21 patent applications filed in India, as on June 17, 2023.
• Its product SWITCH UAV, won the largest mini-VTOL(Vertical Take-Off and Landing drones) UAV contract in March 2022, against global competitors from Russia, Israel, France, Ukraine, and other countries which is a testimony to its technical prowess.
• Its PE ratio is 88x (fy23 earnings ) and may appear to be expensive. One need to consider that company has shown a robust revenue growth in the last two years. The profit margins are also impressive. In FY21 company had low scale of operation and pandemic may have also played a role.
• There are no Indian listed companies that are engage in a business similar to that of the company. Just for rough idea, DroneAcharya Aerial, CMP Rs. 174/- which is listed on BSE SME and is into Drone pilot training clocked FY23 revenue of Rs. 19 cr and PAT of Rs. 3.4 cr, with a PE of 122x
• I intend apply in ideaForge Technology IPO and in my view there is no need to wait for last day in this case. The ideaForge Technology IPO is expected to garner good response. Looks OK to me both from a listing gain or as a short to medium term investment.
• GMP as reported on social media has been steady and may be in range of Rs. 470-485.

Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.