Drone Destination Limited (DRONE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Drone Destination Limited Q4 FY '24 Earnings Conference Call hosted by Perfect Relations. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Mamta Samat from Perfect Relations. Thank you, and over to you, Ms. Samat.

Thank you, Neerav. Good morning, everyone, and thank you for joining us on Drone Destination Limited FY '24 Earnings Conference Call. Today, we have with us the senior management represented by Mr. Alok Sharma, Chairman; Mr. Chirag Sharma, Managing Director and CEO; Mr. Shekhar Jangid, CFO; and Mr. Arun Kumar, GM, Accounts. Before we begin, I would like to say that some of the statements that will be made in today's discussion may be forward-looking in nature and must be viewed, therefore, in conjunction with the risk that the company faces. It is subject to unforeseen risks and uncertainties, and actual results could materially differ. We will begin the call with the opening remarks from the management, after which we will have the forum open for the interactive Q&A session. I will now request Mr. Chirag Sharma for the opening remarks. Thank you, and over to you, sir.

Good morning, everyone. I'm Chirag Sharma, CEO at Drone Destination Limited. Today, I'm present here on this call with our Chairman, Mr. Alok Sharma; our CFO, Mr. Shekhar, and our GM account, Mr. Arun. So on behalf of my team, I extend a warm welcome to you, and thank you for your presence today at Drone Destinations first earnings call since listing last year. We would like to take this opportunity to thank all those who have reposted by investing in the company at various stages of our journey thus far and look forward to your continuous encouragement and support. We would also like to thank everyone who's present here today who's sparing your valuable time for this call. So we hope that you had the opportunity to review our results, including the press release, which is available on the stock exchange. To begin with, I will spend some time to give you a broad industry overview and walk you through our progression over the last 5 years. I'll then invite Shekhar our CFO, to shed light on the financials for FY '23-'24. So as you're all aware, drone sector is the sunrise sector in India with potential to significantly impact multiple spheres of life, including defense, surveillance, agriculture, mapping, mining, infra, disaster management, health care, photography and many more such areas. I would like to mention that the government of India with the help of robust policy and launch of drone power schemes and initiatives has played an anchor role in pushing for adoption of drones over the last few years. Some of these initiatives include the new liberalized drone rules that were revealed and launched on 25th of August 2021, that abolished the erstwhile lengthy regulatory process that was involved to do drone operations in the country. With the new rules, ease of doing business has given an impetus to the drone sector. Another radical change that happened, which was a great positive for the industry, was the opening up of Indian skies for drone flying with the help of release of new airspace mapped on government's digital sky platform. In this newly published map, almost 90% of the Indian airspace has been designated as a green zone, wherein local drone operators owning legal drones can fly drones freely without any other prior permissions. This increases the adoption and of the whole sector significantly. Then the government has also introduced PLI schemes for drone and drone component manufacturers. Since February of 2022, DGFT has banned import of drones to promote localization of drone manufacturing in India. There are several Drone Shakti initiatives, which have been rolled out by the government of India. Some of these large-scale schemes include the Svamitva scheme for mapping of more than 650,000 villages in our country using drones and providing land owners with right of ownership via digital property cards. Another large scheme is the SMAM or Sub-mission on Agricultural Mechanization Scheme, which has earmarked budget for providing 40% to 100% subsidy and purchase of agriculture drone and its associated training up to an amount of INR 10 lakhs to push for drone adoption in digital agriculture. There are several other government PSUs like NHAI, Coal India, who have mandated use of drones to improve operational efficiency and security. On the Agri front, Ministry of Agriculture has also released SOPs for application and spray of agrochemicals and fertilizers using drones. More recently, the government of India has also launched the Namo Drone Didi Scheme to empower 15,000 women from self-help groups and provide them with drones and drone training. And lastly, the requirement of passport to become a legal and certified drone pilot has been abolished to include or create a more inclusive environment for drone training in the country. Now anyone who's a class 10th pass and above 18 years of age with an Aadhar card and a valid secondary ID proof, which could be a DL, voter ID, ration card or passport is now eligible to become a drone pilot. So speaking about our company, drone destination has been fortunate to be part of a growing startup ecosystem over the last few years. After an incorporation in middle of 2019, we started out India's first exclusive drone training center in February 2021 at our Gurgaon facility with our partner, IGRUA, Indira Gandhi Rashtriya Uran Akademi, which is the largest and the only flight training organization under Ministry of Civil Aviation. Within the next 12 months, we expanded to 5 locations and many times opened the first drone training center in different states, like Karnataka, Gujarat, HP and MP. Once the new drone rules came in, private players like us were also authorized to open our own drone training schools and Drone Destination received its first independent authorization to open an RPTO or remote pilot training organization in January of 2022 at our Gurgaon facility and later expanded to 3 new locations in Chandigarh, IFFCO Phulpur and IIT, Patna. We currently operate 12 DGCA certified training centers, including those with our partners and have certified more than 4,000 drone pilots till date. For FY '23, '24 Drone Destination has maintained roughly 30% market share and a 35% rev share of the certified training market estimated to be INR 45 crores to INR 50 crores. In 2022, Drone Destination also made its foray into the drone services division and took active participation in a much-acclaimed PM Svamitva Yojana along with 2 GIS partners in the state of UP and Gujarat. Later in the same year, we also started working with more GIS partners and undertook work for large scale drone mapping in the state of Karnataka. So far, we have mapped close to 800,000 hectares of area under the Svamitva Yojana. Our service division has also undertaken some other small-scale surveillance and monitoring projects for the Government of Bihar and other state departments. In November 2002, Drone Destination also became NSDC's first drone training partner. Now speaking about the last year, it's been a pretty eventful year for us at the company as we officially listed ourselves in public market in July 2023. In comparison to FY '22, '23, our revenue was multiplied by 2.7x. Our EBITDA has almost tripled and our PAT is also multiplied by 2.76x. A few highlights from last year. We've trained more than 2,100 pilots with our partner IGRUA. We've been an active participant in the Namo Drone Didi scheme and trained more than 600 Namo Drone Didi's nominated by a new client base, which includes certain new fertilizer and agrochemical companies such as IFFCO, KRIBHCO, Chambal, IPL, Indorama, et cetera. Drone Destination also won and executed its first independent drone survey project from the Andhra Pradesh Land Record Department mapping more than 1.4 lakh hectares in the state of AP. In November of 2023, we forayed into our agri-spray services business and quickly executed one of the largest drone spray demo projects doing more than 28,000 drone demos for IFFCO within a span of about 60 days under the Viksit Bharat Sankalp Yatra. Beginning of 2024 this year, we also started our drone sales and service division. So Drone Destination as we speak today, stands on a high-growth trajectory and aims to scale its integrated service and training network pan-India. Going forward, we see good traction in all 3 broad divisions that we are working towards, which is training, services and drone sales and repairs. I shall now hand over the forum to Shekhar, our CFO, who shall shed light on our financial performance last year. Over to you Shekhar.

Good morning, everyone. Thank you, sir. We have had a fairly decent year last year. Our revenues grew from INR 12.07 crores to INR 32.62 crores, showing a year-on-year growth of 170%. Our EBITDA grew from INR 4.7 crores to INR 13.86 crores. We also achieved a growth in EBITDA as a percentage of our revenue from 39% to 44%. And also a year-on-year growth of 195%. Our PAT grew from INR 2.56 crores to INR 7.08 crores. Here again, we achieved an increase in PAT as a percentage of revenue from 21% to 22% and a year-on-year growth of 176%. Coming on the cost side, we have been able to manage our expenses well. Whilst the revenue has increased by 170% expenses except depreciation have grown only by 153% year-on-year. The employee expenses as a percentage of total expenses has reduced from 32% to 28%, showing some improved productivity of the employees. As we are expanding, our fixed assets have grown up from INR 5.32 crores to INR 15.35 crores. Due to increase in our fixed assets, our depreciation has gone up from INR 1.23 crores to INR 4 crores. During the year, our drone fleet has grown by 4.4x. Our stock in trade is now increasing as we have started stocking for our drone sales and service activity. In terms of activity-wise performance, the service revenue has grown from about INR 5.85 crores to INR 15.78 crores with a multiplier of 2.7x. Contribution of drone services to the revenue mix continues to be above 50% as in the last year, with an operating margin of over 50%. Our training revenue has also grown 2.26x from INR 6.21 crores to INR 14.04 crores. Contribution of training revenue to total revenue is marginally down on account of faster growth in other activities. The operating margin from training activity is just around below 50%. We now have about INR 2 crore revenue from drone sales also this year, contributing to about 6% of our total revenue. The operating margins from these activities are likely to stay around 15% to 18%. In terms of some key financial parameters, we continue to be an almost zero-debt company. Our trade receivable cycle is also reducing. Our trade receivable turnover ratio has improved from 3.49% to 2.48%. Our return on capital employed is 15%, which is a very healthy sign. Our EPS during current year was 3.42%. Overall, the company's financial performance for the year ended March 31 is very strong with a substantial growth in both revenue and profit indicating effective business strategies and operational efficiency. Thank you for your continued support and interest in the company. Together, we look forward to a future of sustained growth and success. Without taking much time, I would like to open the floor for questions.

[Operator Instructions] The first question is from the line of Saket Kapoor, from Kapoor & Company. Please go ahead.

Sir, firstly, if you could outline to us what are your growth targets going ahead? And how is this revenue split likely to be going ahead for at least 2 to 3 years down the line? The revenue contribution from the sale of drone, the services part, services and training part and the sale of spares. And the entire ecosystem, if you could give us what is the current target market. Just to give some more color on the segment.

Saket Ji, I will take this question. This is Alok Sharma. Okay. See, the market this year is actually going to I would say, get into a very high growth trajectory. The reason is that if you have been watching the developments of the last few months, in particular, you may have seen some announcements being made including by us of large agri-spray activities. So this year is going to be a very defining year for the industry. If the agri sector picks up the momentum, the way as of now, it is envisaged, there is a likelihood of an order, this is what we learned recently, of at least 9 crore acres of agri spray activity itself coming to the pole or into the market. If that is the kind of requirement comes from the market, this is what we got an indication from IFFCO as well, then that alone would require about 22,000 to 25,000 drones to be deployed. This is a very massive deployment, which necessarily means you would need to train maybe drive those kinds of numbers to get -- to achieve those kind of very, very large numbers, which has never been done or even thought about so far. So this is going to be a defining year from that perspective, that agri-spray, which was practically, I would say, just in nascent stage last year, is going to be one of the major activity in the coming year, which will propel everything. It will propel drone sales, it will propel drone agri services, it will propel training. So one sector alone is likely to lift the whole drone industry from a very small level to a very high level. So that is what is going to happen. So in terms of the pie that we have been having so far, which has largely been about 50%-50% between training and services, that is likely to take a shift in all likelihood. We think that it will start going in favor of services more like 65% around that number, it will go towards in services side. And the training would probably be around 30%, 35%. And the drone sales is a new subject for us as well. We still think that it will add about 10% to 15% of our overall revenue, including the after-sales service, which we have to do on the drone sales because this is going to be warranty for drone sales and service. But if we do decide to pick up drones after sale service for other OEMs as well, then it will start changing the color a bit. But we still think that we will go a little slow on that side. We will concentrate on services, training and some bit of drone sales as we have just mentioned.

If we take the drone space as the entire ecosystem, how many -- what are the prototypes, how many specifications are there? And currently, for this spraying agri part of the story, which you are generating from the IFFCO side, what would -- how many of these drones will be catered? [Foreign Language]?

[Foreign Language] Drone Destination is a service provider. Drone Destination is not a manufacturer of drones. So let us first get clear on that side. So Drone Destination can buy from whosoever, right? So Drone Destination is open to buying drones and giving service. [Foreign Language] we are -- we can buy whatever numbers are available and whatever we can execute on our own, that's what is it that we intend to do? [Foreign Language] .

[Foreign Language] whom are we dependent on this sourcing of drones?

[Foreign Language].

[Foreign Language]

Hubblefly Technologies.

[Foreign Language]

[Foreign Language] So we have to -- if we are talking one second, let's say in English okay, fine. So as I said, that we need to be very clear that if there is a requirement of doing that kind of an agri-spray. So first, there will be a requirement of drone sales. So if there is a requirement of INR 9 crore, INR 10 crore acres of agri-spray, it will require at least 25,000 drones -- about 25,000 drones to execute that kind of a project. That be the number just in terms of what you need to buy as drone sales, along with the batteries and other infrastructure, if there is a rough cut number of that they say that the whole infrastructure that is required is about INR 10 lakhs just on the drone and accessory side. So 25,000 drones into INR 10 lakhs is about INR 2,500 crores business of drone sales alone. Then it is a matter of the training business that comes with it, if we calculate the training revenue at our numbers, our numbers have been higher than the market. But even if you calculate about INR 50,000 for a trainee and then you need to do training of 25,000 into probably 2 people, 50,000 people. So that is into INR 50,000. That's another number of about INR 1,250 crores. So then we are talking of if what is the per acre revenue that you can likely to get, that would be about -- even if we take a mean average of INR 400 per acre or INR 400, INR 500 so that alone is about INR 4,000 crores of business. So if you look at the whole thing that it can generate, just this kind of an activity that it can generate, we are talking about INR 7,000 crores of potential business that is coming in, and this is keeping defense side, survey and mapping side out. So if we are really looking at -- we are quite bullish that if -- the market demand is now there in the market, okay? Now it is -- it is now the matter of how much supply and how fast can this be executed because if the orders are coming now, if the industry responds slowly at what pace does the industry respond to it, will actually determine as to how much of this about INR 10,000 crores business will get delivered in this year. But of course, it doesn't get delivered this year, it will -- but this is now a concurrent, it is a repetitive business.

[Operator Instructions] Next question is from the line of Vinay Agarwal from Pro First Global Assets.

Sir, my question is, I have heard from sources that IFFCO want to give you order of 1 crores square yards of land, but you took a small piece of 30 lakh square yard. Why did you do that?

So as I just mentioned, it is going to be a very large. In terms of platform, we are only looking at the capacity that we have and what we can put on the ground in this time. So that is why we have kept our interest in this to only 30 lakh acres.

Okay. Sir, my second question is, as the drone industry is booming and drone industries is in very starting stage till now and the company is looking for any merger and acquisitions for a near future?

Yes. So currently, based on the current ecosystem since Drone Destination has had a fairly integrated play. We are, of course, in-housing some technology to automate our own processes. So if need be in that specific scenario, we may look at some technical acquisition to just fasten up the scale of growth, but at present, the company is pretty self-sufficient in terms of managing the current scale, and that is the reason why when Alok sir also mentioned about 30 lakh acres. So this is well within the range of the company's current scheme of operations. And so we will continue to persist with that, but if need be, and we may look at some alternate acquisition to just fasten up our pace of growth.

Sir, my last question is you have started business in drone soccer and it looks very cheerful. But what would be the revenue from this soccer business? we can expect this year and what would be the growth size we are expecting for next 3 to 5 years.

Okay. So okay, you -- of course, you heard it right. Drone soccer is a new revenue stream that we, of course, would like to develop in this year. As of now, in our business plan, we are keeping it very modest. We are still looking at less than INR 5 crores of revenue coming out of Drone soccer. But we will develop it further. We think that this has a huge potential the -- it is -- as of now, we do not want to really give very futuristic numbers on this, but this has the potential to be running on its own [ steam ] going forward.

[Operator Instructions] Next question is from the line of Rajeev from Longview Research.

Congratulations to show your good results. My question is -- what is the sales proposition. [Foreign Language].

You want to know the percentage in terms of the pie chart basically of the total revenue, right?

Yes. [Foreign Language]

Yes. Training has a 47% share in total revenue. Agri services at 37%, and drone sales have about 6%. These are the major components of it. Survey and mapping is also about 13%.

Pardon [Foreign Language].

13% as of now.

And what is the rent percentage?

Rent percentage as in of -- in terms of you are asking if in comparison to total rent. Rajeev, are you trying to mention like drone rent as a service, like a composition of that?

Yes, I'm asking drone as a rent services.

No, we have not done that in the last year. So broadly, it's been training, services and drone sales. These are the 3 heads under which the company had its revenue matrix laid out.

Next question is from the line of Ritesh Kumar Gupta from IPO Mantra.

First of all, I would like to congratulate your team and management. Let me be very clear. I am following the SME IPO market since its inception from 2012. So it's a very proud moment for all of us because your company is doing very good. And I feel very happy when IPO investors who takes shares from IPO or from open market earn handsome money. And your company's Drone Destination has really delivered. So first of all, congratulations for this.

Thank you.

Now, I want to ask that I have seen that you are coming up with your preferential issue. So I have heard some from common sources that some good investors are participating in there. So I would like to know that Mr. Madhu Kale is also participating. I'm particularly asking about this because these types of big investors move the confidence of other investors as well. So if you would like to tell us about it, I would like to ask?

See, as of now, we are still in that process, I must admit. And we have already given a list of all the people who are coming in, in our -- on our stock exchange listing. So let us first complete that process. And then it will be better for us to comment on this.

No problem sir. Accept my [ deepest ] congratulations because we have done very well on the stock exchange. You have rewarded the investors.

Sorry, please come again.

You have rewarded the investors well, so accept my congratulations.

Thank you.

Next question is from the line of Sanjeev Damani from SKD Consultants.

Firstly, thanks for the opportunity. Secondly, sir, a great sort of organization you have created in modern times. So really, you deserve all the congratulations from all of the society. So now I'm coming to the question that, sir, I have noted everything you are doing very well. So now the outstanding is INR 19 crores rupees as of 31st March. So how are is our payment terms condition with our buyers?

So I would answer that. Our outstanding of INR 19 crores includes our recent revenues mostly like we have done most of the sales if you have seen our half yearly to half year results, most of sales was done in the second half year. So due to that, most of the collection is being done for that. Whatever we are billing our payment cycle is normally for private players is about 2 to 3 months, mostly. For training, we are mostly collecting in advance or within one month. But if we come to government projects, there is a slight longer payment terms. That's why these receivables would be on higher side. Also, this amount includes some advances which we give for our purchasing our assets, et cetera.

Okay. Sir, we have INR 14 crores worth of assets in our books, property, plant and machinery. So largely, these are offices and our godowns or something else?

These are mostly drones and vehicles, which require to support the drone operations.

Vehicles are there, okay. So we own our office wherever we are having our head office or registered office?

No, all of our offices are on rented -- rent-only basis. And this INR 14 crores and inventories there, which is very limited. Our inventories are not very high. So we don't keep stocks of a drone in our account. We only buy whenever necessary from our suppliers.

So as you know, it is only contributing to 6% of our total revenue, this is only a small portion of our sales. So we are keeping inventory as we require or as we have the orders. So we are not putting much money into inventory.

One thing I want to learn from you, are we fully manufacturing drones in India, those who are our supplier or we have to dependent on imports of basic critical parts and then manufacture drone here.

So since Drone Destination is not in the manufacturing space, I think that may -- I would rather leave that question for manufacturers to answer. We buy from the market type certified drones for our own service operations. So when it comes to indigenization, of course, the Indian ecosystem is moving towards localization.

So largely, it is imported and supplied to you. Can it be taken like this?

I had mentioned in the beginning, import of drones is banned, right? So there are people -- there are different companies who have their own indigenization percentage within their own companies, but these are largely drone OEMs. So of course, they vary from company to company. But there is -- you can't import drones. That's illegal and banned.

Absolutely, very nice, sir. Can I know a few names, sir? That is my last question, and I'll come in the queue. Can I know the name of the manufacturers big or small in India, if I can.

I mean, yes, so there are names. I mean, I don't know, so there's different manufacturers, ideaForge, there's Hubblefly Technologies, there's Garuda. So these are a few names that can come to our mind at this point, yes.

Okay. Thank you very much, sir. Thank you for guiding and all the best for future, sir. You are in the sunrise...

Thank you.

[Operator Instructions] Next question is from the line of Hardik Rawat from IIFL Securities.

Just wanted to understand your business process. So roughly 50% today is coming from training and the rest 50% is coming from agri services, right? Just wanted to understand what are the unit economics on your agri services business. So if you undertake agri-spray for say, like in terms of area, can you please provide us like what sort of a revenue potential does it create a specified area of land that you undertake the agri-spray for?

Okay. First, to just comment that it is not 50% for agri-spray. We are saying 50% for training and 50% for services as this time, for example. Last year, we did not have agri service at all. All the percentage was coming from our survey and mapping activity. So in terms of economics, for an agri-spray activity, the operating margins, probably that's the question that you are raising, if I understand it well.

No, no. What I'm trying to understand is, say, for example, if you get an order for 1 lakh square meters to be sprayed, like percentage...

Let's say acres, so we are talking acres.

So for example, for one acre, how much, what is the revenue potential...

So, the revenue expected out of an acre should be between INR 400 to about INR 700, depending upon the geography, crop and the timing. So it will depend upon that. So for example, sugarcane gets you a little higher per acre revenue than a normal crop.

Got it. And okay, INR 400 to INR 700 for agri sprays and for survey and mapping, 2 things. Firstly, within the process that the government has initiated according to you, how much of it is already completed? You mentioned that about a 50,000 villages -- 20,000 villages -- 50,000 villages have to be mapped into the scheme. How many villages have been mapped and what is the incremental opportunity from here on?

Okay. So there were 2 schemes that ran concurrently at that time. One scheme was to do mapping of the villages itself, where the villages live -- and then -- and that is called Abadi area, okay? The second part was with the farmland of the village, which is covered under the scheme called large-scale mapping. So just for us, as of now, probably I will relate to where we stand. So we practically have finished, except some bit in now Gujarat. We have finished our own work in UP, which was allotted. We have finished our work in, I would say, about 60%, 70%. More than that, it's finished in Gujarat. So that is the Svamitva part that we were doing. In terms of activities, we think that the -- it is still going on in states like Rajasthan, some states are yet to start, like Bihar is yet to start, West Bengal is yet to start. So there are many states which are even yet to start. But when and how will that come up is something that we are all going to watch. So that is what is going to happen in future. In terms of large-scale mapping, as far as we are concerned, we have been doing work in Karnataka and Andhra Pradesh. The work which was allotted to us, the tender that we won, which we had gone for about 2,500 square kilometers out of which about 1,400 square kilometers has been delivered. We are still waiting for the order of the balance, which we hope that we will get it this year. In terms of Karnataka, also, we -- there is still a lot of large-scale mapping activity left to be done by survey of India. They would still have at least 35,000 square kilometers to be delivered to the state government. We think that we will be participating in that as well.

Got it. And sir, what would be the unit economics here in survey and mapping. So like-for-like for...

So these are already declared rates. So there are rates of INR 18,000 per square kilometer and INR 6,900 for large scale mapping. This has been won by different companies. We work with some of our partners, and we share our revenues with them.

Got it, sir. So I'm hoping that over the next, 4 to 5 years, this should largely be done. And incrementally, your services revenue is largely going to comprise of agri sprays....

I said, according to us, there is another thing. There is another segment which is getting added in the same bracket, which is that almost 190 cities are required to be mapped. If there is a new project coming at the urban mapping. There are total 5,000 towns and cities, which will undergo survey and mapping activity now after the villages. Okay? Out of which the request from Survey of India is already out to -- for the -- from the companies, which had participated earlier, and the companies which have participated with us also have shown interest in that and have said yes to that. And 190 cities are the first ones which are going to get mapped under this project of urban mapping at the same price as of now of INR 6,900, which was discovered. Incidentally, there were only a few drones, which got qualified earlier. And 4 of our drones got qualified to do this kind of work, which included Svamitva large-scale mapping and will now also participate in this urban mapping activity.

Got it. Just one clarification. So you mentioned INR 6,900 for large-scale mapping and INR 18,000 per square kilometer. What is the difference between the two?

No, the difference is one is Abadi area, where the villagers live, which is a concentrated, you can call it like de-village. The habitated part of it. And then, yes, because that requires a little more [ extensive ] flying, okay? We call it so that has required more intense flying, then when you do a large-scale mapping. You can cover a lot more in a day from the same drone team in large scale mapping then you can do when you are going an Abadi area activity.

Got it. Sir, one last question with regards to the service that you provide. So I'm assuming that it is going to be your employees who are operating the drone. And you are undertaking the mapping and then you are giving that whatever data that you come up with, the mapping that you do. That is what you deliver to the government. And this is a central government program, right?

Okay. It is a central and state together program. In Andhra Pradesh, it was a state project.

And so it is your employees who are operating?

Sorry.

Yes, go on please, Svamitva is?

Svamitva, the federal government puts in more money than the state government. And otherwise, it is -- the large scale mapping work is given either through with -- by the state government themselves.

Got it. And all right, the large part of my question is answered. I'll get back in the queue.

[Operator Instructions] Next question is from the line of Deepak Poddar from Sapphire Capital.

Sir, just wanted to check now this recent order, I think with IFFCO for spray up to 3 million acres, right? So what's the timing of this execution? Any understanding we have?

Yes. See, in terms of timing, this order is to be completed before 30th September this year. But we will -- we are all trying to ramp up our capacity and see how we can deliver this.

Okay. So ideally, that means if I have to take an average of INR 500, INR 600 per acre. So 3 million-acre would amount to around INR 150 crores, right?

So yes, if you do the math, yes.

And that would be only your services revenue. And you have about 30%, 35% training and loan sales as well. So overall, so what sort of execution level we may look at in this year, FY '25?

To stay away from forecasting on this forum, I would say that you are doing the math yourself. See if as I mentioned, if the training of about INR 1,000 crores is going to come this year, which is a possibility, but it depends upon the capacity of the drone industry to build so many drones, that is another something very, very important that whether the industry can deliver 25,000 drones this year. But if the industry can deliver that, and the training there is a substantial training which is likely to happen, no doubt about that. So in terms -- we should look at moving. The way we are moving, you can yourself count that the opportunity is huge.

Correct. Correct. And this year, what sort of training -- I mean, total pie we are expecting industry size in terms of that may be required at the industry level?

See, at the industry level, if we talk about -- again, if the base number is INR 9 crores, then you're looking at training 25,000 pilots plus 25,000 co-pilots. But as Alok sir mentioned, it also depends on not just the number of drones, but how many more training organizations or bases will also open up with the regulator in picture. So the commensurate growth of the industry will also depend on how many training organizations are available across the country to support such a massive growth. But having said that, in the past, we have had a history of scaling up working and having that large network. So that experience helps us to scale commensurate to the growth that we foresee in the near future that's coming with us. Our current capacity is of about 6,000 trainees a year, which we're expanding to 10,000 students this year.

6,000 trainees per year to 10,000 trainees per year?

We already have a capacity of training 6,000 students per year, which we are increasing to at least 10,000 students in this year.

And per training, we get around INR 50,000, right?

So our average revenue this year has been rather decent. It is close to INR 65,000 in the last financial year. But of course, as things rationalize, we're looking at a co-pilot also coming into play. So an ARPU of roughly INR 50,000 given the market forces and how it's expanding can be expected.

Understood. And just one last small thing. Given the mix that you mentioned about 50%, 60% services, 30%, 35% training and 10% to 15% drone sales. With this mix, what sort of EBITDA margin one can assume?

Okay. We should continue to maintain the EBITDA that we have seen, at least in the foreseeable future. That's what we take.

That is about 40% right now, correct.

That's about 40% and PAT is about 20%. PAT is about 20%, 21%, 22%, 20%.

Next question is from the line of Pradeep Rawat from Yogya Capital.

I have some basic questions. So with regard to our competition, who are our competitors and what is our edge?

Yes. So thank you for the question. So when we talk about competitors for Drone Destination on to an integrated presence actually had segmental competition. So maybe I can break it down in terms of segments. So in training space, we have certain regional competitors in South in the form of Anna University, in Garuda Aerospace. And in the West, we have DroneAcharya, PBC Aero Hub as some competitors. But overall, with Drone Destination and IGRUA's combined, might we continue to remain the leader. When we talk about the drone survey and mapping activity, there is a company called AEREO, which is a large player in the system. MapMyIndia, Indrones, Pioneer, are some close competitors. And when we talk about agri services, since the official, mass rollout starts from this year, the competition is yet to build up. But from a holistic perspective, we may see companies like Garuda, Aerospace, Drogo Drone who may come at an integrated level as a foreseeable competitors. And I think your second question was in terms of what's probably a key differentiator or USP. So I would say, one, even when we started, we realized the ecosystem had a lot of start-up founders at college level who did not have significant business experience behind their back. But incidentally, with Drone Destination, the core management team comes from an extensive aviation background, which makes us very unique in this space, and that has historically managed and successfully led from large scale round-the-clock operations. So having managed fleet and aircraft and that kind of an operation, Drone just becomes a second close cousin, right? So apart from the past performance and demonstrated capabilities of executing large projects at great speed, the company has also rolled out a network of drone hub on wheels, which is capable of delivering these offerings for the company. So our focus stands at achieving high level of operational efficiency with the widest network. Today, we're in about 15 states and deliver these services at the lowest cost per unit provided by the company and also achieved the fastest turnaround time. So this has been largely our unique selling point or USP for the company. I hope that answers your question.

Yes, yes. Fair enough. And I have another basic question. So for me to fly a drone, I would need a license, right? So you provide that license or somebody as like a government entity provides that license?

Yes. So in this scenario, I'll give you a parallel with the driving industry. So in driving industries, the RTOs where you go and get to driving license. In our scenario, the RPTO, which is us or any remotely piloted training organization authorized by DGCA, which is a regulator is allowed to issue this license. And the reason is because the volume and the expected growth of these numbers are so significant at the regulatory level, let's say, at the DGCA level, these volumes would -- it would get almost infeasible for them -- unfeasible for them to monitor such kind of licensing. Hence, they've authorized private and government players to come in and open up their own RPTO's. So we are the licensing authority or in this scenario of certification authority. So a pilot ends up getting something called a remote pilot certificate from us, which is publicly recognized document under drone rules and a completely legal document for a pilot to fly in the country.

And last question, sir. I was looking at your website, and I like see that you are offering training courses. So that courses have only 0 or 5 reviews. So any like light on that?

Good question. So largely, over the last few years, we've had a very institutional market. So we've been serving corporate government customers. As the industry is speaking the B2C audience is yet to come in, in large numbers. And when you have institutional customers, we have our own internal rating mechanism, which the regulator expects us to maintain. So we have had fantastic feedback internally. And that is the reason why we keep commanding the market share also that we have is because we've delivered on quality and having that early mover advantage has helped us. So in the world of social media, we may not be publicly marketing it too much on the B2C side and hence the reviews don't show up. But having said that, we have institutional clients who have been backing us up for a long time, and we have repeat customers and patronage from them over the last few years.

Next question is from the line of Gunit Singh from Countercyclical PMS.

Based on the previous commentary, what kind of growth in top line and bottom line are we looking at in FY '25 and for the coming 2, 3 years?

See, as you just heard us, the market is going to seriously increase from this year onwards, okay? So we have been having, as you saw, even in last year, we grew almost 2.7x, which was explained to you. So we should at least start looking at maintaining the momentum, building up the momentum, we have had an early mover advantage. So we should continue to build upon this -- this sector is new, and it is throwing up lots of opportunities. We should really look at taking a decent position in this.

All right sir. The orders from IFFCO for 3 million acres, that is expected to be completed by 30 September 2024. Is that right?

Yes. The mandate of this collaborative approach in this memorandum agreement that we have signed is that let's try and achieve 30 lakh acres by that time.

All right, sir. And how is our mapping different from a LIDAR based mapping? Or is it similar? Can you throw some light on that?

Yes. They are completely 2 different things. One is called LiDAR is a different more precise kind of mapping. We think that LiDAR mapping business is also going to grow as we move forward but the technology so far on LiDAR has largely been used on aircraft and helicopters. It has come down to drones. And we have also developed our own drones, which can do LiDAR mapping and as more drone start begin to use LiDAR as a technology, we think that the momentum will show particularly for mapping in mining and forests.

Next question is from the line of Anik Mitra from Finnomics.

What is the current drone market size in India? I'm referring FY '24, what was the total drone market size in FY '24 in India?

So it's a very relevant question and Anik Ji, there are so many -- we've had so many people ask us this question. But I can just share with you that there is a new report, which is to be -- which is expected to come out in over a month's time, so Drone Federation of India and McKinsey have been working on the more current report with their thorough research over the last few months. So I think you'll be able to get a better sense of how that market was placed even last year and what we're looking at from a more realistic perspective in about a month's time. So there aren't too many credible sources. So we may not be able to cite something specific. But we do foresee and know of a report that's coming soon. So I think that should be able to address your question.

Understood. Sir, still, on a rough-to-rough basis, let's say, what is the contribution of defense in drone and in agriculture.

So you know, because we're not in drone markets, so it's hard to comment, to be honest, to do a defense versus civil split is something we may not be completely informed about to answer you. Drone Destination plays in the civil space and hence would only be able to shed light more on the civil side, we're not -- on the -- and specifically on the training and service part. Since we're not in defense, it would not be prudent for us to answer that, yes.

Sir, you said your contribution from agri is around 37% at this point in time. So how much acreage you are catering now?

So that 37% came from 28,000 drone demonstrations that we did with IFFCO in the month of -- from November to January over a period of 60 days.

Okay. And sir, when you are referring about your agriculture -- with your contribution to the agriculture sector. My question is how many -- how much of inventory do you need to maintain for agriculture? And as well the similar question I'll ask regarding the training part, like you said you were -- you have the capacity to train 6,000 persons. So in that case, like for training 6,000 persons, how much drone inventory you need to maintain? And what is the life of one particular drone for training and for agriculture.

Okay. Generally, on for a depreciation purpose, the companies give the life of drone as 5 years. Okay. That's for depreciation purpose. That's one. The second thing is that we intend to deploy at least 800 drones ourselves to cater to this demand that you have just mentioned of the order that we -- of the activity that we are supposed to undertake.

Okay. So 800 drones for agri?

For agriculture, yes.

For Agri. And sir, its life is 5 years?

Sorry.

800 drones with 5 years of life?

Yes. But this is -- we would need 800 drones to do this 30 lakh acres. And then what you require is lots of batteries for this. It is just not drones. It is lots of batteries, which are required to be used for doing this Directorone space. So typically, each drone needs to have 8 to 10 batteries to execute such projects.

Okay. So what is the life of one battery means how much, I mean how long...

It is calculated in terms of number of cycles that it needs to charge. So that varies -- more likely about 300 cycles is an average that the industry takes when it calculates its numbers.

Okay. And sir, similarly, for catering your 6,000 training, how many drones you deployed?

So this, we are saying we are operating out of 12 locations. And if we keep about 40 drones for these 12 locations, we should be good enough on our training side.

Okay. 40 drones for entire 12 locations or per location?

No, no. Yes, it's about 3 drones for one type of training. In terms of if we have to now divide between different types of training. So a stock of about total of about 50 to 60 drones of different categories to take care of the 6,000 trainings.

Okay. And sir, you are enhancing your capacity from 6,000 to 10,000. So what is the CapEx you are looking for?

So that is of course, we need to go up. So we are going to use, so much of it is going to be invested in drones and simulators and batteries. So much of the investment will go into that side. For opening this, the other infrastructure will come from the partners that we are going to engage with, like we have done in the past to kind of move from -- on an investment front, if we have to do go from 6,000 to 10,000 capacity, we should be looking at an investment of about INR 3 crores to INR 4 crores.

INR 3 crores to INR 4 crores. Sir, I will be very happy if you provide me a little time separately. Would like to speak in details to understand the sector in detail. So I will mail you sir, kindly respond me back.

Next question is from the line of Tushar Sarda from Athena Investments LLC.

On the IFFCO order, is IFFCO going to make the payment or we have to collect payment from the farmer.

Okay. It is split between 2. So some of it will come from IFFCO and some of it has to be collected from farmer.

So how much is IFFCO paying and how much is farmer paying. And I mean what is the split between material and actual spraying costs?

No,no, material is different. Material is altogether different. There is another opportunity on the material side as well. The material side opportunity is yet to be -- we are still not counting that in. There is an opportunity to sell input as well. The IFFCO on its own site for subsidizing it is like subvention, right? So it is -- they from their side, are going to pay INR 100 per acre from their side. And the rest of it, we will collect from the farmer.

And how many times do you have to do this spraying? Is it once or is it 3, 4x a year...

Each crop requires different kind of sprays. So this -- so from a minimum of -- and then there are cycles each time. So there are opportunities of spray from 2 to 3x to almost like sometimes 12 to 14x as well in the season.

And how confident are you about the farmer's ability to pay and willingness to pay, they may be able, but they may not be willing to.

We see quite a lot of excitement in the farming community for adoption of this technology. And we see lots of push from the government of India as well as the fertilizer companies to move towards this particular mechanization as it is going to save substantial sums of money for government of India. If the farmers are able to use this technology and also adopt the nano technology, which is going as of now into lots of fertilizer substitution like in urea and DAP and now we have potash as well. Now if this -- and it saves tons of money from the subsidy that the government has to spend on agri inputs. So we believe that this is like this thing has come. It is now -- the adoption is on its way.

So you have 2 challenges, right? One is the adoption of Nano Urea itself by the farmer because it is still not very prevalent. And second is the farmer's ability and willingness to pay. Is my understanding right? I mean I understand opportunity is very big, but I'm just trying to understand what are the challenges?

Absolutely. Absolutely. The challenges of adoption of Nano Urea and Nano DAP and -- and probably now we hear about other nanos as well. Other products coming in with nano technology, that lies of course with fertilizer companies, and they are doing a great job, and they intend to really speed around this as they have established that the improvement in yields and the substitution process is definitely there. There is a scientific evidence on that side which will help. And that's why all the companies are now moving towards -- there are so many new plants which are coming up for making Nano Urea. They won't be making so much of investment if they are not sure of selling those inputs. So I think that is definitely out there. In terms of adoption of nano products, we have started seeing greater traction on the DAP side already. IFFCO has also launched now a better Nano Urea more concentration with about 20%, they call it some 20% Nano Urea, Nano Plus, which is likely to increase -- further increase the Nano adoption. That's one part of it. In terms of nano, the drone adoption and the technology by farmer, the adoption has already picked up momentum in out of India and in rest of India substantially. It is almost a go-to product now in sugarcane industry for things like chillies, even for crops like soyabean. It is now -- and also now paddy. So some of these crops are already there and wheat. So these crops have already started seeing a lot of drone adoption. Now it is just not urea. They are all the pesticides. So all the companies -- other companies like Syngenta, Bayer and other companies, which are in agrochemicals are pushing drone adoption significantly. So we think that it is just not the nano side of it. There is pesticides also, there are other agrochemicals. But overall, this push is going to take care of both nano adoption as well as drone adoption.

And just as a closing statement to that. Also, if you notice, there's a shortage of labor. There was a recent article also. A lot of these farmers have depended on labor to carry out this spray activity. And of course, the coverage and the -- while the labor is covering about 1 to 2 acres in day, the drones are capable of covering 20 to 25 acres. So of course, the farmer has also accepted that the technology can bring that scale and momentum needed during that same cycle and season when everybody is gunning for that same labor. So what you're essentially doing is drones are also replacing that and changing that mindset in the minds of the farmer.

Sir, the line for the participant dropped. Ladies and gentlemen, we'll take that as a last question. I'll now hand the conference over to the management for closing comments.

We thank you for joining today. And I'm sure you would have learned that it's a sunrise industry. There's a huge opportunity, and we look forward to participating in this opportunity. We have had an early mover advantage. We are, of course, going to build upon that and hope to continue to make shareholder value in this company. Thank you very much, all of you.

Thank you very much. On behalf of Perfect Relations, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.

Thank you.