Last fortnight ideaForge went public, listing at 94% higher than its IPO price in a blockbuster opening.

Winging It in College

Rahul Singh wanted to build a hovercraft in 2004 for IIT Bombay’s Powai Lake. 

Rahul’s innovation eventually turned into a quadcopter,  a helicopter with four rotors, commonly used to shoot video at functions today.

In fact, the drone in the famous Bollywood movie 3 Idiots is an Ideaforge product. 

After graduation, Rahul Singh and his co-founders founded the company in 2007. They continued to build on the technology and do projects with IIT Bombay. One of the projects was for a competition jointly held by the US Department of Defense and the Indian Army at Agra. 

IIT Bombay ended up winning in the ‘hovering’ category. The aircraft, including all its hardware, electronics and software stack, was built by Rahul and his team.

This was a huge validation and recognition of the capability the company had been building. Post the competition, the Ministry of Defense secured Ideaforge’s autopilot technology to supplement their drone experiments. 

Ideaforge was born. 

They saw an opening here and continued to build prototypes and improve on the technology. They started to receive more inquiries about the autopilot technology. 

In 2008, the unfortunate Mumbai terror attacks on 26/11 turned out to be a turning point in the company’s journey. Seeing naval choppers hovering around the Taj hotel and trying to look into the third and fourth floors, they realised that this was precisely the job for a drone - small, agile and easy to command.

They regretted that their technology wasn’t being used in such an operation. 

From that day on, the company turned its focus to building technology for the armed forces and homeland security would go on to be an early customer.  

The founders realised that despite the many drone applications, there needed to be more interest or products available. Propelled by the early years of technology building, they stared at an entirely new market. 

The market of flying vehicles, without people

Taking Flight

Unmanned aerial vehicles (or UAVs) are aircraft that can fly without the presence of pilots onboard. 

They comprise aircraft systems that help them fly, sensors and ground control stations. UAVs function as eyes and ears in the sky while being controlled from a distance. Sometimes, they could be used as a transportation device. 

‘Drones’ and UAVs were used interchangeably. Usually, UAVs have some form of autonomous flight capabilities - they can operate without being controlled by a human! 

The applications for these vehicles were extensive, ranging from security and inspection to disaster response to agriculture monitoring and mapping services. 

While picking a use case, in addition to the value of reliable aerial surveillance to the defence sector, Ideaforge also considered the ability of customers to find returns on investment. Given the high initial costs, a consumer system would take a long time to find value for a hobby drone. 

From the early days, the team consciously built the full-stack software solution in-house. They didn’t import products from China or use off-the-shelf software. 

In 2009, they could leverage no open-source software or autopilot technology. Moreover, considering the software would be used by defence forces, it was tested in some of the most challenging conditions. 

This called for a high degree of robustness and depth in the technology stack they built. 

While this was challenging and increased the time to market, it allowed them to make changes to customise the product and create differentiators in the market. As they perfected the technology for the defence use case, they found other customers with similar use cases.

The survey of India required survey-grade mapping with high accuracy in measurements such as volumetric estimation. 

Other agencies used it to track project progress over large areas, mapping land in villages or monitoring religious congregations such as the Amarnath pilgrimage.

Ideaforge was pushing the boundaries in UAV technology.

In 2009 they developed a 10gm UAV - the world’s smallest and lightest. In the same year, they released India’s first fully autonomous vertical take-off and landing UAV.      

Ideaforge also ensured that its products were easy to use for the defence sector. 

Ankit Mehta, their co-founder, admitted to middle school-educated jawans being able to operate their platforms with minimal training.

While it seemed like an exciting value proposition, in 2011 the company hit a significant roadblock.

Unfriendly VC Skies

Nobody wanted to fund ideaForge. 

Developing such technology required a team. Hardware businesses are more challenging to fund than typical tech startups that raise capital based on initial user growth or transactions. 

Investors need to be convinced that hardware can scale. 

In addition to the hardware problem, most Ideaforge’s business came from the government sector. VCs usually see government-aided projects as risky and uncertain with their payment schedule. 

Ideaforge was a tiger at a zoo - that people wanted to admire from a distance but not go near. Investors want to see differentiated products and confirmed deals of a certain quality and size to fund.  

In 2012, Ideaforge had both. But nobody bit. 

They had built a proven technology stack applicable to a range of applications and, by 2014, had delivered about 70 drones to Indian government agencies.

Customers started to include the armed force, central and state police departments, disaster management forces, forest departments and civil customers. Their vehicles played a crucial role in many situations. 

In 2015, Ideaforge UAVs were used for search and rescue activities during an earthquake in Nepal. The following year, they delivered critical intelligence during a terrorist incident in Pampore. 

In 2016, the IT major Infosys led a $1.5 million round. This was followed by a VC-led $10 million Series A the same year. 

Characteristic of the drone sector, the company first had to prove results before receiving funding rather than the other way around. 

Given the capital requirements to build cutting-edge technology and the need for talent, this was a chicken-and-egg problem.   

However, with the wind beneath their wings from the initial contracts and funding, they could stay capitalised with a combination of VC funds and debt. 

With a golden goose in the form of the government sector and rising interest from civil customers, Ideaforge was finally taking the long flight. 

Regulatory Turbulence

The opportunity in front of Ideaforge was huge. 

The demand for drone technology in India’s defence and enterprise markets, such as mining, broadcast, telecom, oil and gas, agriculture, photography and infrastructure, was apparent. 

But in 2016, drone technology still needed to take off in a big way outside defence.

Within the defence market, mainly, ‘Make in India’ drones started getting a big push. Given the need for intelligence and surveillance projects and the perceived risks associated with imported drones, there was an urgent need for domestically manufactured ones. 

This helped to position ideaForge quickly as a critical player in the market with the advanced capabilities they were developing.

Beyond the defence sector, applications existed in product delivery, disaster management, and more – the many uses of drones were being discussed and implemented in different parts of the world as technology advanced every day. 

A few of these applications had already been seen in action. 

ideaForge UAVs were used by the Indian Army to look for survivors after the Uttarakhand floods, disaster management during the Nepal earthquake, and crowds during the Kumbh Mela. One of ideaForge’s drones also helped track a man-eating tigress in Uttarakhand. 

While these were infrequent use cases, they expanded the capabilities of Ideaforge and things were starting to get exciting.

Despite the capital issues, operational glitches and demand cuts from time to time, ideaForge persevered to stay at the top of every situation. However, regulation was an area that was beyond their control. 

Just as drone deployments finally began to see traction, it was offset by global incidents showing that drones were a nuisance around critical infrastructure. 

Consequently, the government banned private use of these systems in 2017. Then, with a new policy, it also banned the usage of drones by homeland security forces. 

The entire industry was on the back foot, and it was difficult to operate in the space.

Up, Up and Away

The market was in a quagmire for a year, with no demand and no approvals. 

ideaForge and the entire sector received a need fillip in the form of the blanket ban on drones being lifted in 2018. 

While the regulations did not go the whole hog, they were an essential step in the right direction. 

The new drone regulations 1.0 allowed operators to fly after taking clearance through a mobile app, kicking in on December 1, 2018. The easing of the rules was expected to trigger a boom in the use of drones by public/private enterprises and private service providers.

By the start of 2019, ideaForge had delivered over 100 UAVs to the Indian defence, central armed, and state police forces, all extensions of the Indian government. The company enjoyed an enviable 95% market share for this segment. 

However, industry estimates suggested that nearly 90% of the drones on the commercial side - used for mapping, surveillance and weddings - were imported, mainly from Chinese manufacturer DJI. 

Importing drones was subject to permission from the DGCA and the Directorate General of Foreign Trade. 

An estimated 40,000 drones were flying in the Indian skies, almost all illegally. 

Flooding the market with smuggled drones prompted the government to ban imports in 2018. But operators continue to import illegally by circumventing the approval process, as no domestic manufacturer could match the price and quality of the Chinese products. 

The new regulations were meant to change that and make imports harder.

For civil operations, India took an exciting route. 

The `Digital Sky' portal, an online platform for automated flying permissions for civil operations, was launched on December 1st, 2018. Through this portal, individuals and organisations could apply for flight permission. 

Once the permission was granted, the user uploaded the protocols on the UAV to unlock the Autopilot software for flying the UAV legally. 

ideaForge’s decade of struggle was paying off. 

NETRA was one of ideaForge’s products, with a vertical takeoff and landing UAV, the only one in India. It was built on a quadrotor configuration that the team developed in collaboration with Defence Research and Development Organisation (DRDO). 

This UAV could take off from a small clearing by the roadside and fly over an area up to a height of 400m while sending continuous real-time videos of movements on the ground. The UAV had 60-minute in-flight endurance – more than any other globally.

The orders rolled in. 

In 2019, NTPC, India’s public energy company, was using NETRA to study the degradation of solar photovoltaic plants, LiDAR-based terrain mapping, photo gram metric volumetric analysis of coal stockpiles, and visual inspection and monitoring activities at NTPC sites.

ideaForge’s drones borrow mechanisms from several disciplines. Rather than employing off-the-shelf prototypes, the ideaForge team has chosen rigorous improvisation and integration through the development of indigenous software.

Pricing of the products has primarily been a function of market dynamics, and the pricing range was wide. Products suitable for customers wanting to dip their toes in the domain for the first time were significantly cheaper than those fully qualified and rugged, delivering leading performance.

By 2020, it would be in pole position as India’s leading manufacturer. 

Lifting Defence Spirits

COVID’s requirement to operate at a distance would make drones life-saving. 

Delivering supplies, goods and services, drones were not just a good to have but a must-have. Another major incident would make drones indispensable for the Army. 

Post the 2021 terrorist attack in Pathankot, the army began paying greater attention to using drones and snapping them up. 

The Indian army ramped up their orders for drones with ideaForge. They wanted more drones to help patrol the borders. 75% of ideaForge’s revenues began to be driven by defence projects.

ideaForge’s drones continued to be used by the government beyond defence use cases. 

ideaForge’s drones mapped land in 660,000 villages to give its inhabitants clear titles to their land. ideaForge implemented the tender in 2021 to map towns in six states in the project's first phase.

Such use cases were expected to drive demand on the enterprise side.

While costs are always a huge consideration to adopting any technology in a human capital-rich country like India, drones benefit from the fact that their capabilities are sometimes unmatched. 

For example, a mine surveyor takes many days to assess stockpile and find haul routes for trucks, a task that drones can do in two-three hours.

While the enterprise and defence side of the business were expected to grow dramatically, the consumer side faced headwinds. Rigorous import permission process and training requirements were mitigating factors. 

Service providers were required to take training from DGCA-authorised schools to communicate with air traffic controllers. The regulations made it expensive for explosive adoption.

Even as demand was diversifying, the company rapidly enhanced its technology. 

In 2021 the company Prime Minister Shri Narendra Modi presented two indigenously developed drones, one of them being ‘SWITCH 1.0 UAV’ developed by ideaForge. This was part of a $20 million order the company had received from the Indian Army.

SWITCH 1.0 UAV, with its peerless capabilities of 1.5 hours flight time and 15 km range at more than 4500m take-off altitude, beat its international and domestic competitors to qualify for this deal. 

SWITCH could support the Indian Army’s most demanding surveillance operations. By 2022, the company will list seven variations of drones on its website.

The global revenue for the drone industry had exploded to an estimated $21 billion in CY22. India’s drone sector was only $2.7 billion. 

As India grew, the drone sector had too as well. ideaForge was now poised to turn on the burners and charge ahead.

Aerial Showdown

ideaForge came 7th globally in the dual-use category of drone manufacturers in December 2022

Establishing itself as the pioneering market leader with a market share of approximately 50% in 2022, every 5 minutes, an ideaForge-manufactured drone took off for surveillance and mapping in 2023. 

Their customers have completed over 350,000 flights using the company’s UAVs as of March 31, 2023 

Seeing ideaForge’s success, other competitors followed. 

The company's biggest challengers were Urban Matrix, PixelVision Technology, and Big Bang Boom Solutions. In 2023, a total of 278 drone startups existed in India. 

Ideaforge remains with the highest market share relying on its 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). 

From Ladakh to the Thar desert, ideaforge's UAVs have operated in extreme conditions of extremely low temperatures and high altitudes. 

The highly crucial application of defence operations, idea forge has consistently maintained a cutting-edge standard of their UAVs Some of their UAVs have flown more than 4,500 flights, as against the minimum requirement specified in RFPs for 500 flights under warranty. 

The Indian Army signed an approximately $20 million contract for a high-altitude variant of SWITCH UAV after a drone attack at the Indian Air Force base at Jammu. 

As only ideaForge could qualify and deliver the functional requirements of real-life conditions, idea forge led the Indian Army's aggressive technological advancements. 

It was now making serious money too.

Sky’s the Limit

Post 2021, ideaForge exploded. 

ideaForge grew at an astonishing CAGR of 137.47% in terms of revenue from operations over the last 3 Fiscals, with a ROCE of 12.5% in FY23.

The company’s revenue went from INR 35 crore in FY21 to INR 186 crore in FY23. The majority of its revenue was from the defence sector

To continue this momentum, ideaForge needed money to grow. 

It planned to raise ₹550 crores, of which nearly half will return to paying debt. The rest would be utilised in developing new products and meeting the needs of running its daily operations.

Sunrise sector, the market leader in its segment, ranked 7th globally in dual-use drone manufacturers, well positioned for scalable and profitable growth. 

Raising funds looked like a piece of cake. The raise looked easy on paper, but in reality it was a different story. What was true in 2010 was true in 2022. 

More reliance on government-aided projects was a big risk for drone manufacturers, with much thrust on defence sectors.

Governments aren’t known to be timely with their payments either. To some extent, it is evident from their financials as well, as its receivable days are more than 500 days in FY23.

It continued to be a capital-intensive sector. Hence, justifying a valuation of 14x on revenue or a PE multiple of 88x looked difficult. 

Due to these factors, attracting VC money remained challenging for the company. But nobody expected what would happen in the public markets. 

As the company approached the public market with the narrative that it's a nascent sector with high growth potential. ideaForge took a strong make in India's narrative, where they were strengthening the Indian defence sector. 

India would never go through what happened in 2008. 

The public markets lapped up the narrative. In a time when tech stocks were battered, the ideaForge IPO got oversubscribed by 106 times.

550 crores came like a flood. 

ideaForge got listed with a bumper listing gains of 94% and was off to a flying start on public markets.

Defying Market Gravity

ideaForge seems to have the wind beneath its wings, but there could be turbulence.

ideaForge has the first-mover advantage. They have been around for over 15 years and have been able to fine-tune their products to grow the nascent drone ecosystem. But it is only recently that drones have taken off significantly. 

Plenty of competitors have emerged quickly.

23 entities have qualified for the PLI scheme. These include a behemoth – the Adani Group, which has a joint venture with a premier Israeli company. Israel is considered a pioneer in this space, as they were the first country to use drones in a war in 1973.

Another big threat to ideaforge is the import of drones for the defence sector, because this is not banned and it is ideaForge’s core revenue segment. 

India is contemplating importing Predator drones from the US worth US $4 billion. 

These unmanned aircraft will help with surveillance and can even drop missiles when needed. That’s not something ideaForge’s drones can do yet.

ideaForge does not have long-term contracts with its customers, even though they have developed long-standing relationships. We have seen in various cases how new entrants have eaten up incumbents' market share.

ideaforge can bank on its past strengths to maintain its market lead and learn what works from its decade-plus operations and experience.

If we look back at their journey, the story has just begun with drones increasingly finding their potential to be employed in multiple use cases across infrastructure, retail, agriculture, homeland security, and many other sectors. 

The breadth of opportunities available are unprecedented and the government is determined to make India the Global hub of drones by 2030. 

In 15 years, a college startup that built a company around drones has gone public. ideaForge looks set to continue to shock, awe and surprise as drones become more commonplace.

Writing: Keshav, Ajeet, Anisha, Rajiv, Varun and Aviral Design: Chandra and Omkar