ideaForge IPO: How 26/11 terror attack motivated IIT Bombay students to found India’s largest drone company

What started as a college project at the Indian Institute of Technology (IIT) Bombay in 2004 by Ankit Mehta and Rahul Singh has evolved into ideaForge, the largest drone manufacturer in the country. On the back of this transformation, the firm has decided to tap the capital market with an initial public offering (IPO) of Rs 567 crore, which is set to open on June 26. The company has set a price band of Rs 638–672 per share for the forthcoming issue.

Journey so far

Ankit Mehta, CEO of ideaForge, called it a surreal journey. “It started off as a fun project where one of our co-promoters Rahul Singh wanted to make a hovercraft and float in the lake right next to our campus. As we continue to build on technology, an innovative helicopter developed with the quadcopter concept, which you see in weddings these days. That was our first prototype, which we used in a 2004 in college fest.”

Mehta added that this project also helped IIT Bombay secure pole position in competitions in 2008. “That allowed us to showcase our technology capability. We started delivering [what are called] brains of a drone, which is the autopilot, for various projects with DRDO Labs. And that started us off on the drone side of our journey,” he said, adding that the firm started operations in 2007-08.

One incident was critical in the firm’s journey, Mehta said, and that was the terrorist attack in Mumbai on November 26, 2008. He said there were reports at the time of helicopters trying to look into the third and fourth floors of the Taj Hotel, which the terrorists had entered. “That time, we felt like our drones could provide a potential solution for that kind of a situation as well. That’s what motivated us to build this technology for our security use cases. And that's how the journey began,” he told to Sakshi Batra of Business Today TV.

The company launched its product in 2009 and its early prototype drone was used in the blockbuster Bollywood movie 3 Idiots, which popularised the concept of drones. “We have a mission to serve our Jawan and the Kisan via Vigyan,” Mehta said.

About the company

ideaForge was ranked seventh globally in the dual-use category (civil and defence) drone manufacturers as of December 2022. It has grown at a CAGR of 137.47 per cent in terms of revenue from operations in the past three financial years, with a return on capital employed (ROCE) of 12.51 per cent in FY23. It has a broad range of products with feature-based differentiation such as weight class (approximately 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.

The company’s product portfolio consists of hardware, software and embedded sub-systems and solutions. Its growth over the years is attributable to the indigenous design and technological capabilities, ability to invent, design and deliver customer-centric offerings and their vertically integrated operations.

Objective of the issue

The IPO is being floated to repay debt of Rs 50 crore. In addition to this, around Rs 135 crore will be utilised towards funding working capital requirements and Rs 40 crore towards investment in product development. The IPO consists of a fresh Issue of equity shares up to Rs 240 crore and an offer for sale of 4,869,712 equity shares.

What’s in it for investors and employees?

Retail investors can bid in a lot of 22 shares and multiples thereof. On the other hand, the company has offered a discount of Rs 32 per share to its employees.

According to the management, the company has reserved 13,000 shares for employees. “We definitely feel that our journey in the last 16 years contributed to the people who have been part of it. There is a significant amount of contribution and growth that they have brought in for us. We wanted to give them a possibility to participate in the ownership as well as the company,” Mehta said.

Clients

The management further said that defence forces, central armed police forces, state police forces as well as many government departments and private enterprises are their clients. The company’s order book stood at Rs 192 crore as of March 31, 2023.

Revenue composition

Vipul Joshi, CFO, ideaForge, said the company generates about 75-80 of its revenue from the defence sector. “We expect similar ratios to continue with a slight bit of merit in the single market,” he said.

Analysts’ take

Vaibhav Kaushik, Research Analyst, GCL Broking, said, “ideaForge looks great from an investment perspective. The company has excellent Unmanned Aircraft Systems and mapping business concepts that should be applied both short and long term. The product has been used in both the real world and the mining industry. In the long run, it might reach Rs 2,100.  The listing is likely to happen at around Rs 1,200,” Kaushik said.

Ravi Singh, Vice President and Head of Research, Share India, said, “ideaForge is a market leader in the Indian Unmanned Aircraft Systems market with a market share of around 50 per cent in FY22. The company’s revenue has grown multi-fold over the years. Though PAT has witnessed ups and downs, Investors may subscribe to this IPO for listing gain,” he said. The IPO will close on June 29.

 

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