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As investors wait with bated breath for the listing of drone manufacturer Ideaforge’s shares tomorrow (July 7), the blockbuster initial public offering (IPO), oversubscribed 106 times, has a clear message for all. Drones are here to stay and drones could be the next wave of sought-after new-age tech companies reaching for the skies.
Although drones were being used by the defence sector and selectively in other areas, the Centre’s move to liberalise both manufacturing and use of drones in India (Drones Rules 2021) sparked the spirit of enterprise in this sector. Scores of start-ups are now willing to stake their energies, skills and resources to fly high as the sector is set to be a disruptor across industries.
For now, defence may be the largest sector using drones. But read this article, which highlights the vast drone market that is broadly classified into enterprise, consumer, logistics and passenger. The government too appears to be bullish on India’s potential to be a global drone hub by 2030 and having an estimated turnover of over Rs 15,000 crore. The Centre was quick to float a production-linked Incentive scheme to promote this sunrise sector that has found many takers.
Little wonder then that Ideaforge, which is ranked 7th globally in the dual-use category (civil and defence) drone manufacturers, is expected to double allottees' money on listing! Meanwhile, another company Drone Destination -- a company offering drone as a Service and Training -- is set to hit the IPO market tomorrow.
Such companies could lure the next round of private equity and venture capital funds, too. The Ideaforge IPO's success and its public visibility is a major shot in the arm for India’s fledgling deep tech companies, explains Chandu Nair (read here). Deep tech can also include, inter alia, artificial intelligence (AI), machine learning, Big data, Internet of Things (IoT), quantum computing and robotics.
However, investors in such companies -- particularly retail investors -- would do well to keep in mind that such new-age technology companies, including drone makers and service providers, have long gestation periods. Often, this keeps the return ratios subdued. Besides, competition is high and set to increase further. Further the rules, regulations and legal policy framework are still evolving, which implies that those who are unable to comply may see their fortunes compromised.
Right now, the mood is upbeat, particularly fuelled by the stock market euphoria around such companies. Recently listed firms in the drone sector such as DroneAcharya Aerial Innovations, trade at over 100 times price-to-earnings ratio. But investors willing to risk their funds with such new-age bets in their portfolio may step back to recount the meltdown seen earlier in fintech, edtech and e-commerce companies that singed the pockets of allottees.
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Vatsala Kamat Moneycontrol Pro
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