Decoding Red Herring Prospectus of ideaForge

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Decoding Red Herring Prospectus of ideaForge
Drone manufacturing company, ideaForge has filed
its Red Herring Prospectus (RHP) with market
regulator Security and Exchange Board of India
(SEBI). The Mumbai-based company is looking to
raise around Rs 570 crore from the public
market. The fresh issue size will be Rs 240
crore while the company will offer its 48,69,712
equity shares, aggregating a sum of around Rs 327
crore through an offer for sale. The company had
filed its Draft Red Herring Prospectus (DRHP)
with SEBI in February this year to raise Rs 300
crore via fresh issue. As per the board, the size
of the fresh issue of up to Rs 300 crore has been
reduced to the revised size of Rs 240 crore. The
RHP further revealed that the drone startup has
raised a pre-IPO round of Rs 60 crore from
Motilal Oswal Mutual Fund, Think Investments PCC,
360 One Asset Management and Tata AIG General
Insurance. Following the round, the company has
been valued at around Rs 2,560 crore. ideaForge
has appointed JM Financial and IIFL Securities as
the book-running lead managers (BRLMs) for the
listing while Link Intime India Private Limited
will be the registrar.
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Out of the total fresh proceeds from the public,
Rs 135 crore will be used towards filling the
working capital gap. The company plans to utilize
a further Rs 50 crore for repayment or prepayment
of borrowing from HDFC Bank, Axis Bank and Export
Import Bank of India and Rs 40 crore for product
development and the rest for other corporate
purposes. The offer period of the IPO will be
from 26th June to 29th June 2023 with a price
band of Rs 638-672. As per the indicative post
issue timeline, 7th July 2023 will be the listing
date of the company. Founded in 2007, ideaForge
focused on providing advanced unmanned aerial
vehicle (UAV) solutions. It designs,
manufactures, and supplies UAVs along with
associated hardware components such as payloads,
batteries, chargers, and communication systems.
They also offer software and embedded sub-systems
that enable industry-specific applications. Addit
ionally, the company is developing UAVs as an
on-demand service for various applications such
as DFR, progress monitoring, and inspections.
This will allow quick deployment of drones to
assess situations and make informed decisions in
real-time, even before first responders
arrive. Shareholding Pattern As of the date of
RHP, Celesta Capital is the largest stakeholder
in the company with 12.78 stakes followed by
Florintree Enterprise who owns 11.85 of the
company. Promoters Ankit Mehta, Rahul Singh and
Ashish Bhat collectively command 27.89 of the
cap table. The complete shareholding pattern of
the company can be seen below Financial
Performance ideaForges revenue from operations
surged 16.7 to Rs 186 crore in FY23 from Rs
159.4 crore in FY22. ideaForge primarily provides
drones to Indian defence forces, hence it remains
the largest source of revenue in FY23 forming
nearly 70 of the total. In the civil segment,
its drones are used by forest departments, state
police departments, disaster management forces,
among others.
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Besides operating income, ideaForge also earned
Rs 10.4 crore as non-operating revenue (income
and gains on financial assets). Following the
42.7 and 89.6 increase in its cost of materials
and employee benefits to Rs 58.84 crore and Rs
50.9 crore respectively during the year,
ideaForges total expenditure went up 39.8 to Rs
155.6 crore in FY23. ideaForge spent around
27.37 of its operating revenue on employee
benefits. The rapid rise in expenses negatively
affected the companys bottom line. ideaForges
profits shrank 27.3 to Rs 32 crore in FY23 as
compared to Rs 44 crore in FY22. Significantly,
the firm recorded a loss of Rs 14.62 crore in
FY21. The contraction in profits can be
attributed to over 4X jump in ESOP expenses
(booked under employee benefits) of Rs 27.7 crore
during FY23. For complete information visit here