Droneacharya Aerial Innovations coming with an IPO to raise upto Rs 33.97 crore

Droneacharya Aerial Innovations

• Droneacharya Aerial Innovations is coming out with a 100% book building; initial public offering (IPO) of 62,90,000 shares of Rs 10 each in a price band Rs 52-54 per equity share.
• The issue will open for subscription on December 13, 2022 and will close on December 15, 2022.
• The shares will be listed on SME Platform of BSE.
• The face value of the share is Rs 10 and is priced 5.20 times of its face value on the lower side and 5.40 times on the higher side.
• Book running lead manager to the issue is Corporate Capital Ventures.
• Compliance Officer for the issue is Mukula Jayant Joshi.

Profile of the company

The company is a full-fledged innovative solution, based out in Cultural and IT hub Pune, Maharashtra, with offices operating in Pune. The company was started off in 2017 by its founder and Chairman & Managing Director Mr. Prateek Srivastava with a vision to encourage multiple aspects of Drones, Drone-as-a Service (DaaS) and Geographic Information System (GIS) is a system that creates, manages, analyzes and maps all the types of data.

Currently, the company provides high-end ecosystem of Drone solutions for multi-sensor Drone surveys, data processing of Drone data using robust high configuration workstations, Drone pilot training & specialized GIS training. The company’s offerings can be classified into four broad categories namely, Training, Services, Surveillance and others.

The company’s recent pre-seed funding round closed at a whopping $4.6 Million, which is the highest for any drone startup across the country. Such figures have also garnered partnerships for the company with multiple application based drone tech startups. The company’s recent partnership with TSAW Drones, a drone logistics startup based out of New Delhi, strikes as a significant milestone in the Indian UAV industry. Aerial IQ with their tether drone product Aviral, has also mutually agreed to become service providers for Droneacharya’s surveillance requirements in the near future.

Proceed is being used for:

• Purchase of Drone and other accessories.
• General Corporate Expenses.

Industry Overview

Over the past few years, Drones have come to be used in various industries and for varied purposes. From quick deliveries at rush hour to scanning an unreachable military base, Drones are proving to be extremely beneficial in places where humans cannot reach or are unable to perform operations in a timely and efficient manner. Six other uses of Drones include aerial photography, express shipping or delivery of goods, supplying essentials to remote places, thermal sensor Drones for search and rescue operations, geographic mapping, crop monitoring and forecasting, etc. The usage of Drones in urban planning, infrastructure development, construction planning, maritime procedures, manufacturing and inventory management, etc., are also notable. The use of Drones in the following areas have been increased significantly in the recent years.

The immense potential of drones has led to their increasing adoption in India, too. Though both the industry and the market in India are at a very nascent stage at the moment, there is immense growth potential for both. A major thrust will be given by the willingness of the present Indian government to use drones for a variety of purposes, including crop mapping and surveillance of infrastructure projects, pushing the projected value of the domestic industry to around $421 million in 2021. The Indian Unmanned Aircraft Vehicle market is projected to grow at a CAGR of 18% during 2017-23.

The Unmanned Aerial Vehicle (UAV) sector holds tremendous opportunities and if unleashed, has the potential to transform many of the sectors and could contribute 4-5% to India’s GDP, due to multiplier effect. Since 2001, around 38 companies have applied for industrial license to manufacture UAVs in India. Furthermore, more than 50 start-ups have started providing services in this new industry. The global market is witnessing a boom despite several concerns relating to its potential use as a weapon, proprietary and privacy infringement. The future holds many new avenues for the use of UAVs as they are expected to replace 80% of operations presently carried out by manned aircraft. As per NITI Aayog estimates, the Indian market for UAV will be $50 billion over the next 15 years. 

Pros and strengths

MOU between Rashtriya Raksha University and Droneacharya: Rashtriya Raksha University (RRU) to establish DGCA Certified Remote Pilot Training Organisation (RPTO) in Gujarat aiming to upskill the next generation, their main objective is to satiate the ever growing demand for certified talent in the Indian drone industry. The collaboration represents a major step towards democratizing access to drone pilot training and associated courses, as well as providing a forum for students interested in non -traditional education or building a career in the drone industry. In addition, the company will be the first RPTO in Gandhinagar, Gujarat. In light of the existing importance of the drone industry and current education system in Gujarat, this will be a significant step for all parties involved, including Droneacharya, Rashtriya Raksha University, and the general public. In addition to boosting awareness, these courses will play a significant role in making India a global hub for drone technology.

Partnering with TATA STRIVE: Recognizing the potential of talent generation for the drone industry, Tata STRIVE and Droneacharya Aerial Innovations have partnered to provide skill-based training to youth from underserved communities in the sector. The association is a stepping stone in making drone pilot training and associated courses available and known.

Well equipped with advance technology: The company is well equipped with all the advance equipment’s as available in the Industry. This provides the company edge over its competitors.

Risks and concerns 

Business is dependent on the contractual arrangements entered by the company: The company enters into contracts with its clients which impose several contractual obligations upon it. If it is unable to meet these contractual obligations and / or its clients perceive any deficiency in its services, it may face legal liabilities and consequent damage to its reputation which may in-turn adversely impact its business, financial condition and results of operations. There are also some contracts, which terminable by its clients in writing upon committing any breach or non-observance of any conditions of the Agreements entered into viz. fraud by the company or any misconduct of its associate employees which could adversely affect the reputation of its clients. While, it considers all factors internally prior to entering into such contractual agreements, it cannot assure that such clients may choose to terminate their agreements with the company based on the terms stated above. Further, the non-compliance or breach of the terms of the contractual arrangements by either party to the agreements may lead to, among other things, damages, penalties or termination of the agreements, which may consequently result in its inability to attract further business in the future.

Substantial working capital requirements: The company’s business requires significant amount of working capital and major portion of its working capital is utilized towards employee cost. As on June 30, 2022, the company have nil outstanding of unsecured loan and the amount of working capital is funded from owned fund. Its growing scale and expansion, if any, may result in increase in the quantum of current assets. Its inability to maintain sufficient cash flow, credit facility and other sourcing of funding, in a timely manner, or at all, to meet the requirement of working capital or pay out debts, could adversely affect its financial condition and result of its operations. Further, it has high inventories and outstanding amount due from its debtors which may adversely affect its cash flows and business operations.

Intensified competition may restrict its ability to access content: The company faces intense competition from both Indian and foreign competitors, many of which are substantially larger and have greater financial resources than it. Growth in Drone industry in recent years has attracted new industry participants and competitors. The entry of such competitors may change the Drone industry in ways that may not favour the company. Domestic competitors of a scale similar to or greater than its own may impact its ability to attract technical talent, which could have a material adverse effect on its business, prospects, financial condition and results of operations.

Outlook

Droneacharya Aerial Innovations provides high-end ecosystem of Drone solutions for multi-sensor Drone surveys, data processing of Drone data using robust high configuration workstations, Drone pilot training & specialized GIS training. The company played a major role in delivering medical supplies in partnership with Flipkart through drones in the Medicine from The Sky initiative from the Government of Telangana in association with Apollo Hospital. On the concern side, the company’s business is dependent on the contractual arrangements entered into by it. Many of its client contracts can be terminated with or without cause by providing notice and without termination-related penalties. Moreover, the company has substantial working capital requirements and may require additional financing to meet working capital requirements in the future. A failure in obtaining such additional financing at all or on terms favourable to it could have an adverse effect on its results of operations and financial condition.

The issue has been offered in a price band of Rs 52-54 per equity share. The aggregate size of the offer is around Rs 32.71 crore to Rs 33.97 crore based on lower and upper price band respectively. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. On performance front, total revenue has increased by Rs 357.73 lakh from Rs 1 lakh in the fiscal year ended March 31, 2021 to Rs 358.73 lakh in the fiscal year ended March 31, 2022. The increase in revenue was on account of increase in operation and new training programme offered by the Company. Moreover, the company has reported a net profit of Rs 40.65 lakh in the fiscal year ended March 31, 2022 as compared to net loss of Rs 43.08 lakh in the fiscal year ended March 31, 2021. Going forward, the company is maintaining long term relationship with its clients and aiming to achieve this by adding value to its customers through the use of latest and updated technology, quality assurances and timely delivery of results. Further, the company is minimizing errors through continuous process improvement. It also focuses on improving efficiencies at all level of operational process so as to achieve cost reductions to achieve competitive edge.