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India, after successfully adopting electric vehicles, artificial intelligence, and digitisation, is now exploring the usage of drones in several sectors. The country already uses drones for military activities, but commercial drones are also getting due attention.
Once used only for defence, and aerial photography Unmanned Aircraft Systems (UAS), or drones are now used for several complex tasks like vacuuming ocean waste, disease control, or disaster management. These devices are controlled remotely with software embedded in their system that works in alignment with sensors and a global positioning system (GPS).
According to KPMG, India accounts for 22.5% of total global drone imports and is predicted to be the world’s third-largest drone market by 2025. KPMG further predicts that the commercial end-use drone sector with a market size of $900 mn would surpass the military industry in India.
A slew of Government Initiatives to boost the Indian drone sector
The Indian drone sector is nascent, but it is anticipated to thrive in the coming years. In recent times, the Government of India’s “Atmanirbhar Bharat’ or ‘Self-dependent India’ initiative has given a massive boost to the sector. The government plans to make India a Global Drone Hub by 2030. Besides, India has also unveiled several policies to give an impetus to the drone ecosystem.
- In September 2021, it opened 90% of Indian airspace as a green zone for drones flying up to 400 feet.
- The government promises an incentive worth $162 mn over a span of three years under the Production-linked incentive scheme to the drone manufacturing industry.
- In 2022, the government announced the Drone Shakti scheme in its Union Budget to promote drones as a service through companies.
- India restricts the import of foreign-made drones while only allowing imported drone components.
- The government also offers a subsidy of up to 75% to the Farmer’s Producers’ Organisations to buy agricultural drones.
Furthermore, 12 central ministries are working towards boosting the local demand for drone services. These initiatives also aim to create demand for nearly 1 lakh drone pilots soon.
India is keen on developing widespread consumer market applications for drones to keep pace with technological innovations and achieve higher cost efficiencies. Hence, it wants to move beyond defence and monitoring to other areas like retail, healthcare, and logistics. While announcing its liberalised drone policies, India’s Ministry of Civil Aviation said, “Drones can be significant creators of employment and economic growth due to their reach, versatility, and ease of use, especially in India’s remote and inaccessible areas. Given its traditional strengths in innovation, information technology, frugal engineering, and huge domestic demand.”
According to the government think tank, NITI Aayog, India’s drone market is likely to expand to $50 bn over the next 15 years and could substitute 80% of operations currently carried out by manned aircraft.
Challenges of the Indian drone sector
India wants to focus on becoming a drone-manufacturing hub and hence it has restricted the import of drones. However, this may take time and slow down the pace of drone adoption or its commercial use in the country. Furthermore, India faces other challenges like stiff competition from China which has a larger drone market. Adding to the woes are illegal drone manufacturing and drone smuggling.
Indian drone stocks to watch out for
While drone manufacturing is picking up in India, it is a capital-intensive business. Hence, several startups are foraying into the drone-as-a-service (DaaS) market to capitalise on its potential. These startups offer ‘pay per use’ drone services for inspection, surveillance, agriculture, and survey/mapping.
In India, several established companies and start-ups are operating in the drone space. According to Tracxn Technologies, in FY2022-23, drone start-ups saw investments worth $49.7 mn across 20 rounds.
These are some of the Indian drone stocks to consider:
1) Droneacharya Aerial Innovations
Droneacharya Aerial Innovations offers drone-based services and solutions for various industries. Some of its key offerings include aerial mapping and surveying, thermal imaging, infrastructure inspection, and agricultural monitoring. Droneacharya also offers valuable insights after data analysis using cutting-edge drone technology and software.
The company’s net sales rose by 418% year on year to Rs 185.70 mn ($2.26 mn) in the fiscal year ended March 2023. Operating profit rose by 636.9% to Rs 41.12 mn ($0.50 mn).
Listed on the Bombay Stock Exchange as DRON, the company has a market capitalisation of Rs 3.80 bn ($46.25 mn). The company had its IPO in December 2022 and has risen 44% year-to-date. It has a PE ratio of 89.55 and a price-to-book ratio of 5.73.
2) Paras Defence & Space Technologies
Paras Defence & Space Technologies offers military and space industry technology solutions. Paras Defence & Space Technologies forayed into the drone market by creating uncrewed aerial vehicles (UAVs) for both military and commercial use.
The company’s net sales rose by 22% year on year to Rs 2.2 bn ($27 mn) in the fiscal year ended March 2023. Operating profit rose by 0.28% to Rs 454.8 mn ($5.53 mn).
Listed on the Bombay Stock Exchange as PARAS, the company has a market capitalisation of Rs 26.62 bn ($324.25 mn). The company’s stock has risen by 12.7% in the past year. It has a PE ratio of 74.88 and a price-to-book ratio of 6.53.
3) RattanIndia Enterprises
RattanIndia Enterprises has a sizable presence in the power industry with a portfolio of thermal and solar power projects. The installed capacity of the company’s power plants is over 2.7 GW, and there are plans to increase that capacity.
The company’s net sales dropped by 1.1% year on year to Rs 32.3 bn ($393 mn) in the fiscal year ended March 2023. Operating profit fell by 6.44% to Rs 3.3 bn ($40.61 mn).
Listed on the Bombay Stock Exchange as RTNP, the company has a market capitalisation of Rs 57.04 bn ($668.15 mn). The company’s stock has dropped by 1.06% in the past year. It has a PE ratio of 12.41 and a price-to-book ratio of 13.94.
4) Zen Technologies
Zen Technologies is a small-cap drone-tech company. They specialise in heavy lift logistics drones, and their anti-drone system functions on drone detection, and classification.
The company’s net sales rose by 214% year on year to Rs 2.188 bn ($26.64 mn) in the fiscal year ended March 2023. The company posted an operating income of Rs 665.55 mn ($8.10 mn) against an operating loss of Rs 1.05 mn ($0.012 mn).
Listed on the Bombay Stock Exchange as ZENTEC, the company has a market capitalisation of Rs 49.29 bn ($600 mn). The company’s stock has risen by 241.33% in the past year. It has a PE ratio of 114.39 and a price-to-book ratio of 14.74.
Editor’s note: All stock movement figures as of 14th July 2023.
