The overwhelming response to the listing of Pune-based drone pilot training company DroneAcharya Aerial Innovations Ltd., has shown the huge appetite of investors to participate in India’s drone story.
“Backed by the stock market veteran Shankar Sharma himself, DroneAcharya had already generated immense curiosity amongst retail investors,” Prateek Srivastava, founder and managing director at DroneAcharya Aerial Innovations, told BQ Prime in a written response. “With the big push from the central government to become the drone hub of the world by 2030, we feel that Indian investors are ready to pump more capital into the industry in the coming years.
The issue was subscribed 262 times aggregating over Rs 6,000 crore with similar interest from institutional, retail and HNI investors. The company’s debut on the BSE SME exchange was at a premium of 88% to the issue price of Rs 52 per share.
Backed by Bollywood stars Ranbir Kapoor and Aamir Khan among others, the company’s has continuously hit 5% upper limit since listing.
It also plans to manufacture drones and expects that 30-35% of total revenue will be contributed by this vertical in future, while training will remain the dominant business.
DroneAcharya’s revenue from operations in the first quarter of FY23 stood at Rs 3.09 crore, close to the Rs 3.6 crore sales in the entire FY22. The profit in the quarter was Rs 72 lakh, nearly double the bottomline in year ended March.
While the growth is impressive even on a low base, the excitement around the issue probably has more to do with the huge opportunity the sector currently offers, with potential applications in every major industry from agriculture to law enforcement.
Ready to take off
“This is the first time a start-up or a newly founded company in the drone industry has gone public,” Smit Shah, president of Drone Federation of India, said. “Before this, investors had an opportunity to participate only through established companies that moved into the drone sector.”
Investors’ enthusiasm is not without reason as the opportunity is massive.
“It’s an ocean of opportunity which can’t be filled by five, ten or even hundred companies,” Pankaj Akula, chief executive officer at Paras Defence & Space Technologies Ltd.’s arm Paras Aerospace Pvt. Ltd., told BQ Prime.
The Chinese drone industry closed FY22 with a size of $20 billion, which is 10 times India’s drone industry, he added.
In next three to five years, the industry may touch nearly Rs 50,000 crore in terms of revenue, Shah said. The federation is expecting more companies to list on the exchanges in the coming quarters.
According to an EY report, the global drone market is poised to become a $54 billion market by 2025. The drone manufacturing potential in India could be worth $4.2 billion by 2025, growing to $23 billion by 2030, it added.
Landing it right
While there’s a consensus in the industry that government has done well on the policy front, the implementation remains a concern.
The rules governing the permission for flying a drone were overhauled in 2021, making nearly 80% of the country’s area a green zone, up from merely 0.1% earlier, Paras Aerospace’s Akula said. In green zones, no permission is required for operating drones with weight up to 500 kg.
But nearly one and a half year after these new drone rules were notified, only seven drone models have been given the type certificate, a document that deems a drone is fit to fly. Hundreds of drone companies have already been established but only seven have drones approved by the Indian aviation regulator.
While handing out the first type certificate nearly six months ago under new drone rules, the ministry had said it will hand out 100 such approvals in next three years.
According to a senior executive at a drone company, they have been to the ministry many times for getting the type certificate for drone, but due to understaffing or other reasons, it has become the infamous “tareekh pe tareekh” ordeal. Policy implementation seems like a challenge right now, he said on the condition of anonymity.
Sourcing of components related to motors, batteries, cells and electronics is also a challenge as India currently relies on imports for them, according to the industry experts.
The industry is already behind by a decade due to the earlier draconian rules, the executive quoted earlier said. But now that the policy has changed, the huge opportunity can be exploited only after plugging these visible gaps, the executive said. Bloomberg