IdeaForge IPO Saw Stellar Demand. But How To Value Such Drone Makers?
The largely private sector has seen sizeable investments, with 2022 being the best year, according to data from Tracxn.
The immense demand for shares of IdeaForge Technology Ltd. during its initial public offering has made it clear that the country's investors—be it institutional or retail—are looking to grab a piece of the sunrise sector.
Despite it being India's first mainboard drone-centric public company, investors piled on with the offer being subscribed 106.06 times.
Here's the breakdown:
Institutional investors: 125.81 times.
Non-institutional investors: 80.58 times.
Retail investors: 85.20 times.
Employee reserved: 96.65 times.
To be sure, this is not India's first drone-centric listing. In December last year, DroneAcharya Aerial Innovation Ltd. went public via the SME segment on BSE. That issue was also subscribed 262 times, aggregating over Rs 6,000 crore, with similar interest from institutional, retail, and HNI investors.
But, how can investors value such companies that enter the public market?
According to Kranthi Bathini, director of equity strategy at WealthMills Securities Pvt., the valuation metrics will be what is usually followed for regular manufacturing companies. "We are not giving any kind of differentiation in terms of the valuation methods concerned. We don't have any statistics with respect to market share or leadership."
Valuation will be based purely on revenue, Bathini said. "What we are envisaging is how revenue and profitability will pan out in the next few quarters."
According to Bathini, in the case of DroneAcharya Aerial Innovations, there was a lot of exuberance when it was getting listed. "It was the only listed drone company, there were marquee investors onboard, but the initial euphoria fizzled out post listing."
"It went up for a month and then came down. So, how these companies' revenues and profitability are going to pan out are the crucial things individual investors need to take into cognisance before making any Investments."
Bathini said another important aspect in valuing drone companies is how innovative they can be. "Usage of drones in our regular life, with respect to simplifying daily things, is a crucial thing that we need to wait and watch for. It is a completely premature but very exciting industry."
India's Growing Drone Sector
The Indian drone sector is at a "very nascent" stage, according to Bathini. He expects drones to be used in logistics, defence, and agriculture initially.
"These are the initial core industries and the immediate use case in India is defence," he said.
The largely private sector has seen sizeable investments, with 2022 being the best year, according to data from Tracxn. So far in 2023, venture capital funds and private equity investors have pumped in around $25 million.
The sector has seen steady interest from investors. While Garuda Aerospace Pvt. is the most highly valued company in the space, according to Tracxn, it's IdeaForge that has raised the most capital.
India has also witnessed an influx of various stakeholders, including corporations, high-net-worth individuals, and angel investors rushing for a share of the pie.
