Courtesy: https://www.chittorgarh.com/
DroneAcharya Aerial BSE SME IPO review (Apply)
• DAIL is engaged in Drone related services and training business.
• Its financial performance so far indicates likely future trends
• Its current valuations discount all near-term positives.
• DAIL is set to catch the first mover fancy post listings.
• Patient investors may grab this opportunity for long-term rewards.
PREFACE:
DroneAcharya Aerial started as a start-up in Drone related services/training. This sunrise segment is poised for bright prospects ahead as Drone is a well-accepted device/system/service for many sectors and its use is going to see many fold rise with a rapid transformation. No doubt, this service is now brought under the security aspect, its usage has many scopes which are very much under-developed. DAIL is poised to take a leap forward in this segment with its first mover step and it has already attracted many marquee investors to invest in it. Considering its nascent stage, this segment is going to be the future lifestyle. This company’s financial performance is indicated in this direction. The current valuations are discounting all near-term positives, but it is a pure long-term story and patient investors may grab this opportunity.
ABOUT COMPANY:
DroneAcharya Aerial Innovations Ltd. (DAIL) is a full-fledged innovative solution provider in Drone, based out in the Cultural and IT hub of Pune, Maharashtra, with offices operating in Pune. The company was started in 2017 with a vision to encourage multiple aspects of Drones, Drone-as-a Service (DaaS) and Geographic Information System (GIS) is a system which creates, manages, analyzes, and maps all types of data.
Today, DAIL provides a 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.
As pioneers of imbibing drones into the Indian services industry, and upskilling the next generation of job seekers as Geo-Aerial experts through multiple training courses, DAIL has designed training courses to create an individual with capabilities that can range right from data capturing up to data processing and finally conclude with their applications. The company provides Drone training & Geospatial Training courses of various types i.e. DGCA Certified Drone Pilot, Drone Building, Drones for Racing, Aerial Cinematography & Aerial Making, Implement python for GIS, Industrial applications of UAV, Drone data processing, etc.
DAIL has been authorized by the Directorate General of Civil Aviation (DGCA) as a Remote Pilot Training Organization (RPTO) to conduct drone training as per the DGCA guidelines. Since the authorization, Droneacharya has trained more than 150 individuals in the domain of drones, data processing, and python coding for GIS. It has also tied up with Rashtriya Raksha University (RRU) – an institution established under the Ministry of Home Affairs for establishing RPTOs. Recently DAIL has mutually agreed to conduct DGCA certified Drone Pilot Training with Whistling Woods International – Mumbai. TATA Strive has also partnered with DAIL for similar activities.
DAIL’s services vertical provides consultancy services to Govt. & private organizations, reality capture data processing software, anti-drone solution for rogue UAV, UTM air traffic management solution with help of software i.e. UGCS Mapper, UGCS Pro, Reality Capture and Aerial Cinematography & Aerial Making. The company also resells and provides services through various categories of drones namely Blueye X3, Blueye Pro, Echo Sounder, GPR 1000A, GPR 500A, Magarrow, Magdrone R3, and Magnetometer. DAIL aims to be a niche player in Drone related activities/services. As of June 30, 2022, it has 40 employees on its payroll.
ISSUE DETAILS/CAPITAL HISTORY:
To part finance its need for the purchase of Drone and other accessories (Rs. 27.99 cr.), and for general corporate purposes, DAIL is coming out with a maiden IPO of 6290000 equity shares of Rs. 10 each via book building route with a price band of Rs. 52 – Rs. 54 per share to mobilize Rs. 33.97 cr. The issue opens for subscription on December 13, 2022, and will close on December 15, 2022. Minimum application is to be made for 2000 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE SME. The issue constitutes 26.22% of the post-issue paid-up capital of the company.
Corporate Capital Ventures Pvt. Ltd. is the sole lead manager for this IPO, while Bigshare Services Pvt. Ltd. is the registrar of the issue. R K Stock Holding Pvt. Ltd. is the market maker for this company.
Having issued initial equity shares at par, the company issued further equity shares in the price range of Rs. 1800 – Rs. 5349 per share between February 2021 and August 2022. It has also issued bonus shares in the ratio of 6 for 1 in June 2021, and 99 for 1 in August 2022. The average cost of acquisition of shares by the promoters is Rs. 0.009 and Rs. 0.016 per share.
Post issue, DAIL’s current paid-up equity capital of Rs. 17.70 cr. will stand enhanced to Rs. 23.99 cr. Based on the upper band of IPO pricing, the company is looking for a market cap of Rs. 129.54 cr.
FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, DAIL has posted a turnover/net profit of Rs. NIL / Rs. – (0.02) cr. (FY20), Rs. 0.01 cr. / Rs. – (0.15) cr. (FY21), and Rs. 3.59 cr. / Rs. 0.41 cr. (FY22). For Q1 of FY23, it earned a net profit of Rs. 0.72 cr. on a turnover of Rs. 3.09 cr. Thus the company has turned the corner from FY22 and started gaining momentum.
For the last three fiscals, DAIL has reported an average EPS of Rs. 0.13 and an average RoNW of – (45.49) %. The issue is priced at a P/BV of 2.85 based on its NAV of Rs. 18.97 as of June 30, 2022, and at a P/BV of 1.92 based on its post-IPO NAV of Rs. 28.16 per share (at the upper cap).
If we annualize FY23 earnings and attribute it to post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of around 45.00.
DIVIDEND POLICY:
DAIL has not declared any dividends so far. It will adopt a prudent dividend policy post-listing, based on its financial performance and future prospects.
COMPARISON WITH LISTED PEERS:
As per the offer document, DAIL has shown Genesys Intl. as their listed peers. It is currently trading at a P/E of around 58.92 (as of December 08, 2022). However, they are not truly comparable on an apple-to-apple basis.
MERCHANT BANKER’S TRACK RECORD:
This is the 13th mandate from Corporate CapitalVentures in the last six fiscals (including the ongoing one). Out of the last 10 listings, 3 opened at discount, and the rest opened with premiums ranging from 0.61% to 231.63% on the day of listing.
Conclusion / Investment Strategy
DAIL is in the sunrise industry and is poised for a bright future ahead. Though its current valuations discount all near-term positives, this being a pure long-term story, patient investors should grab this opportunity. Post-listing, it will catch up with the fancy as a first mover in this new segment having numerous opportunities for servicing and security.
Review Author
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. With entry barriers, SEBI wants only well-informed investors to participate in such offers. With crazy listings in the past, SME IPOs drew the attention of investors across the board. However, as SME issues have entry barriers and continued low preference from the broking community, any reader taking decisions based on any information published here does so entirely at own risk. The above information is based on information available as on date coupled with market perceptions. The Author has no plans to invest in this offer.
(SEBI registered Research Analyst-Mumbai).
About Dilip Davda
Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.
Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.
Email: dilip_davda@rediffmail.com
