ideaForge Technology Limited (IDEAFORGE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the ideaForge Technology Limited Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this call is being recorded. With this, I now hand the conference over to Mr. Parth Patel. Thank you, and over to you, sir.

Thank you, and good morning. On behalf of MUFG Intime, I welcome you all to ideaForge Technology Limited Q1 FY '26 Earnings Conference Call. From the management side, we have Mr. Ankit Mehta, Chief Executive Officer; Mr. Vipul Joshi, Chief Financial Officer. I hope everyone had an opportunity to go through our investor deck and press release that we have uploaded on our exchanges and company's website. A short disclaimer I would like to say before we begin the call. This call may contain some of the forward-looking statements, which are completely based upon our belief, opinion and expectations as of today. These statements are not a guarantee of our future performance and may involve unforeseen risks and uncertainties. With this, now I hand over the call to Mr. Ankit Mehta. Over to you, sir.

Thanks, Parth. Good morning, everyone. Thank you for joining us today for the Q1 FY '26 earnings conference call for ideaForge Technology Limited. I have my colleague, Vipul Joshi, who is our Chief Financial Officer, with me, along with our Investor Relations partner on the call with us. As we begin this call, I am reminded of the fact that we had our last call right after the Pahalgam terror attacks and while the Operation Sindoor had just begun. And therefore, I wanted to reflect on how resilience has taken center stage in our national security conversations, especially after Operation Sindoor, where drones were extensively deployed on the electronic warfare-rich battlefield, which essentially means jamming or spoofing of both communication with the drone and its GPS position to carry out a variety of missions by our armed forces to gain a competitive advantage over our adversaries. Conversations across different echelons in the armed forces clearly point towards increasing focus on electronic warfare resilience of the drone platforms they are looking to procure now. This was further evidenced during one of the largest field evaluations carried out by the Army post Operation Sindoor, where EW resilience was made a primary evaluation criteria. I'm happy to share that we have had -- that we had identified the need for EW resilient platforms a few years back by looking at and learning from global conflicts. And as we have been informing you in our quarterly calls regularly, we have developed a suite of features and capabilities that make our drone platforms exactly what the customer needs in this scenario. Over the years, we have developed the ability to identify customers' unstated requirements, considering their operations, advancements in technology and global events. And we have successfully built products and solutions to meet these requirements well before the actual need arises. When the hand-launched UAVs dominated the defense landscape, we took an uncharted approach and developed India's first hybrid fixed-wing VTOL UAV for surveillance, the SWITCH UAV, considering that our defense forces and their operational requirements needed that adjustment. Today, SWITCH has the highest deployment with the armed forces in its category with the only platform with the fit for Indian military certification use -- fit for Indian military use certification. This ability to look beyond the noise and identify real needs and build cutting-edge technology and products keeps ideaForge ahead of the curve. For the national drone narrative, the conversation on resilience is fairly recent. However, for ideaForge, it has been one of the core pillars of our philosophy and the work we do. Resilience, in fact, defines the nature of our business and the technology and products that we build. Over the last 2 decades, we have navigated policy and procurement uncertainties, supply chain and technology disruptions and nuances and challenges of being in a deep-tech industry, primarily through resilience. Last year, India's drone industry saw a slowdown in demand due to various factors that we discussed during our earlier calls. Defense companies in general and more so the drone players with large contributions from defense sector were affected because no large procurement happened in the major part of the year. However, the situation has started to improve with the fifth cycle of emergency procurement being initiated in the last quarter of the year. We are proud to share that the -- proud to share with the audience that as a part of this cycle, ideaForge secured INR 137 crore contract for its mini UAVs. This order followed a rigorous technical evaluation and a double validation on the country of origin and IP integrity of our systems, which reflects the elevated standards expected from vendors in this new era, and ideaForge is flourishing in this. The selection of ideaForge is a testament not just to our product capabilities, but also to our resilience as a business; withstanding policy delays, geopolitical uncertainties and procurement in Russia and emerging as a trusted partner for the Indian Armed forces. Now we are seeing an accelerated and focused approach from the government in high-tech defense procurement. This is evidenced by the imminent initiation of the sixth round of emergency procurement from -- for which the government had already allocated INR 40,000 crores to replenish and modernize the armed forces with cutting-edge solutions, out of which INR 9,000 crores has been allocated to the Indian Army. Intelligence, surveillance, reconnaissance and counterinsurgency and counterterrorism applications are now the top priority acquisition areas for the Indian Army. Also, in addition to central procurement, command level procurement will also add to the overall demand. Coming to our efforts and initiatives, we demonstrated long-range surveillance through ZOLT and EW resilience capabilities through all our platforms at one of the largest 3D evaluation trials conducted by the Indian Army in some of the harshest environments. Our next generation of quadcopter and hybrid fixed-wing VTOL platforms, Q6 V3 and Switch V2 are undergoing final evaluations before moving to pilot production. Also, NETRA 5 is in the final stages of the industrialization process. All these platforms have garnered interest during the Aero India 2025 from visitors all over the world, and we are working actively to create relevant opportunities for these platforms. On the larger platform side, we are in the process of building multiple UAVs for testing and prototype readiness review for the Make-II opportunities for ZOLT. Also for our middle mile logistics platform, YETI, the integration of the first technology demonstrator is underway. We are also in the process of designing the second technology demonstrator. For both these platforms, ZOLT and YETI, we are on track for development. Our joint development of the synthetic aperture radar payload with GalaxEye for FOP penetration is also on track, and we are in the final stages of prototyping. We have also built a suite of AI features for our Drone as a Service and FLYGHT Cloud initiatives to improve the solutions' effectiveness and to augment customer experience. Coming to the international front. In the United States, we have made significant inroads with our Early Adopter Program with multiple customers, and we have concluded successfully demonstrations with U.S. Homeland Security and the Department of Defense. Africa has started to show structured movement, especially in the context of border security and infrastructure projects. We have recently conducted a product demonstration in front of defense and homeland security customers in a few countries. The European market has also opened up due to ongoing geopolitical scenarios and initiatives as a part of NATO's expanded budget for battlefield resilience. We also signed a letter of intent with HFCL, a major player involved in telecom and defense equipment industry. Through this collaboration with HFCL, we plan to take ideaForge's world-class UAVs to select geographies. I would also like to acknowledge the push from the Government of India to boost deep-tech sector in general and drones in particular. The announcement of the INR 1 lakh crore in research development and innovation fund for companies working on cutting-edge technologies, including drones, is a strong policy signal that deep-tech is a strategic priority for the country. We are also expecting PLI 2.0 for the drone industry, which will further catalyze domestic innovation and manufacturing. As one of India's earliest deep-tech ventures, we are well positioned to benefit from both these initiatives. Let me now walk you through our financial performance for Q1 FY '26. Revenue for the quarter stood at INR 12.78 crores compared to INR 20.24 crores in Q4 FY '25. Gross profit stood at INR 7.89 crores compared to INR 7.29 crores in the previous quarter with a gross margin of 61.7% in this quarter and 35.9% in the previous quarter. EBITDA stood at negative INR 15.4 crores compared to negative INR 17.41 crores in quarter 4 FY '25. Our order book as of June 30, 2025, stood at approximately INR 144.8 crores. The renewed focus of the government in this sector is both encouraging and promising to deliver meaningful opportunities for us. I'm looking forward to questions and answers now.

[Operator Instructions] First question comes from the line of Balasubramanian from Arihant Capital.

Sir, I want to understand about the product development and innovation side and this ZOLT and YETI progress, like these are next-generation drone like this prototype is in testing phases. When will we expect commercialization and what kind of TAM we can expect?

See, in terms of product -- finishing product development, we are timing it according to the time lines of several Make-II programs as well as certain opportunities that are going to come up post the Operation Sindoor. So that is well on track and is expected to complete in the next few quarters with respect to ZOLT. With respect to YETI, it may take a little bit longer because it's a much larger platform that we are building. In terms of the overall market opportunity and market expansion that happens due to these platforms, I think in both the cases, as we understand, particularly for ZOLT at this point in time, the opportunity in terms of the overall expectation of the opportunity that we are tracking runs into several thousands of crores. We are tracking those opportunities closely and preparing for the Make-II programs and other capabilities on that platform.

Sir, our field test demonstrated electronic warfare resilience and like what kind of USP for military contracts in coming quarters? And how do we compare with global peers? And secondly, I think our AI-driven features like target tracking, LLM chatbots, to enhance competitiveness, like how we will monetize going forward, these features?

So when we look at the EW resilience capabilities, I think I would say that we were actually very comforted by the fact that we have been investing behind those areas over the last couple of years. We've been reporting regularly on our progress on those areas. And when we were required to demonstrate those capabilities, we were able to demonstrate those capabilities based on the testing parameters that were laid out in front of us. And in most cases, we were successful in demonstrating that capability, which is only possible if long-term preparation meets the opportunity and which is what happened in our case. In terms of AI capabilities, I'm glad to report, and we have mentioned this earlier as well that our GPS denied solution is based off AI capability. That is something that we are very proud of, and we are working more in improving that capability further. And in terms of our overall usage of artificial intelligence, we have been partnering with a lot of partners who are enabling us to offer this technology along with internal capabilities to create significant motion. Recently, there was a scenario where we were deployed in one of the large religious congregations. And our AI capability was very helpful in helping manage that situation on ground.

Sir, this emergency procurement order of...

Sorry to interrupt. May I request you to join the question queue again.

Okay.

The next question comes from the line of [ Darshil Jhaveri ] from Crown Capital.

Sir, I just wanted to ask about our order book inflow. So I think we've mentioned we won a INR 137 crores order. But I think in our order book in our presentation, it's showing around INR 145 crores, I think, as an order book. So is the new order reflected in this order book? Or is it a separate stand-alone thing?

It is reflected. It is reflected in this.

Okay. Okay. So our current capabilities, so when do we -- like what would be our execution time line for this order?

Typically, any emergency procurement order comes with a 12-month time line for delivery. And of course, in our case, we will -- we are accelerating the delivery to the best extent possible. So we are already on the job on that.

Okay. Okay. That helps a lot, sir. And I just wanted to know like in a book-picking way, so our revenue is recognized like when we -- so how do we recognize the revenue as a drone, they were completely to the end of the full order completion? How does that work, sir?

See, in most of these contracts, we are scheduled to deliver in various, I would say, various chunks. The delivery is broken into various chunks. So we have to deliver on the basis of those chunks and we get paid on the basis of delivery of those chunks as well. And apart from that, there are advanced payments as well from the investor.

Okay. Okay. Fair enough, sir. So sir, if I could infer like, so currently, our complete order book is basically from the new emergency procurement, right? So other than that, we have, what's our order bid -- so what -- how do we see the demand going ahead, sir?

See the L1 pipeline in general that we've been speaking about earlier is relatively intact. So we continue to expect more closures from -- more closures happening. And that's what we're tracking right now. Some of them will happen earlier then some of the others we are expecting to happen sometime.

Okay, sir. So what was our -- how much have we bidded for, sir? And like could you just quantify that? And like the tenders are going to open in H1 or H2? I know it's very difficult to give an exact time line, but a rough like so we can anticipate it's going to happen in like which half, if that could be given, sir?

So typically, we haven't spoken of anything more than our L1 pipeline. And from within that, some of the conversions will happen within this or the next quarter. And some others, we are expecting towards -- more towards the end of the year.

Okay. Fair enough, sir. And sir, like I think you were mentioning....

Sorry to interrupt. May I request to fall in the question queue again. [Operator Instructions] The next question comes from the line of Hardik Rawatfrom IIFL Capital. As there is no response from the participant, the next question comes from the line of Riya Bhatia from CNBC TV.

Yes. Sir, you've spoken about the L1 opportunity pipeline of INR 400 crores. So is the entire thing for FY '26? Or is this over the next 2, 3 years?

Typically, the expectation is for it to close within this and the coming financial year.

Within this and the coming financial year. And how much of it would be in FY '26 roughly?

That I'm not fully in a position to share right now. And we do expect more to get added to this. So it's an evolving vector.

The next question comes from the line of Hardik Rawat from IIFL Capital.

I had a couple of questions with regards to the order that we have received. Just to be sure, this INR 137 crores order that we've received wasn't captured in the L1 pipeline that we were working with, right? The INR 400 crores did not include this INR 137 crore order.

So it was a part of that L1 pipeline and then more has come in as well.

Got it. So what would be the L1 pipeline as on date for us?

Similar to what we reported last time.

Guidance for the current year, now that we have this INR 137 crores worth of order with an execution time line of roughly 12 months, should we expect that a large part of this contract should get concluded within this fiscal itself, roughly 90%, 95% should be booked towards the revenue for this fiscal?

I would let Vipul answer that question. Vipul, would you want to comment?

Hardik, so since it's been about a month that we received the order, we are right now assimilating a certain time line on delivery of certain parts, which are unique to this particular order. Basis that we should be able to build the overall inventory and the pipeline of delivery. Since any of these MoD orders as well as part of any emergency procurement, there are multiple stages before the deliveries can be scheduled, wherein there's an inspection, which also gets done from the user side and there's a QA agency review as well, which impacts the recognition of the revenue, but we are hoping that we should be able to build a large part of this within this financial year.

Got it. And the current order book of INR 144-odd crores, excluding the INR 137 crores worth of order for the EP5 that you've gotten, the balance order book is just INR 7 crores. Do you anticipate the receipt of any orders during the year, which will again get executed within the same year?

Yes, we do expect conversions from the L1 pipeline. Some of them we'll expect within this or the coming quarters and some of them will happen a little bit later.

Got it. That's helpful. My second question was with regards to the gross margins. We have seen gross margins trend down continuously from FY '22 to FY '25 from 76-odd percentage to 33% in the last fiscal. And now there's a healthy increase in the gross margin in this current quarter to about 61%, 62%. Just wanted to understand, is it because we have booked a lot of service revenue or were these product deliveries that have led to such a jump in the gross margins on a Y-o-Y basis?

For mix of deliveries and service orders both getting executed within this quarter, and largely as how we have been enumerating that it also depends on which order is getting executed in a particular time line and what mix of products are getting dispatched impacts the overall gross profits.

Okay. One last question was with regards to you spoke of...

Sorry to interrupt sir. May I request you to join the queue again. The next question comes from the line of [ Isha Murthy ] from MI Capital.

Our company has like recently secured a substantial order value, which was at -- am I not wrong, it's around INR 137 crores. So like could you please clarify the expected delivery schedule and associated payment cycle?

Vipul, would you like to go ahead?

Sure. So emergency procurement carry a cycle of 12 months for delivery timeline from the order, executed will be also partial supplies, which are broken down between 3 to 4 deliveries of the total quantities received as part of the order.

Okay. Okay. Additionally, is there any possibility of expediting the delivery like potentially reducing the original 12-month time frame outlined in the agreement?

Yes. Like I was explaining to Hardik in last question as well, right now, we're assimilating the overall supply chain. how much time would it take to gather the complete unique parts to this particular orders. And basis that, we will be able to overall look at the time lines of deliveries. And since there are also factors dependent on external agencies in execution, we are hoping that we should be able to make the time lines better than the 12 months.

Okay, sir. Also, I wanted to ask like what are your projections on how the U.K. free trade agreement will influence your duty framework and competitive positioning within European market, like over the coming 12 months, I would say?

I think our foray in the European market is relatively new. We are seeking partnerships and potential collaboration opportunities there. So I'll probably be able to comment on that once we have substantial motion on that side.

The next question comes from the line of Nilesh from JM Financial. As there is no response, we'll move to the next question. The next question comes from the line of [ Shourya Yadav ] from Pinpoint Capital.

With Operation Sindoor and recent MoD emergency procurement, I'm assuming that there has been a reasonable reduction in time taken for defense order. But if you can tell what are the typical timeliness for contract finalization like post testing once we have done the testing, but how much time it would take to get order from MoD before I'm asking for Operation Sindoor and emergency procurement in terms of months or years, how much time it takes before this?

In the last cycle, they have taken about 6 months to give the order. So that's the previous experience I can quote in so far as the EP procurement is concerned.

And sir, post this operations and emergency procurement...

Sorry, I can't hear you.

And post the Operation Sindoor and EP that we are seeing, like how much time now government is taking?

See, there's always obviously an expectation of acceleration, but I cannot comment on the actual time lines immediately.

Okay. And sir, my second question is, I want to understand that post this operation that we have observed a promising surge in defense drone players, including start-ups, which is very good but specifically for the kamikaze drones, which were used in the Operation Sindoor, there has been a scarcity of players who are capable of developing kamikaze above the range of 300 and 400 kilometers. Like could you elaborate on the key technicals or development challenges that is preventing the Indian manufacturing from cracking this kamikaze drones above 300 and 400 kilometers. And are we looking to venture into this segment?

So I think it will become very technical to answer that question for the audience here. So I'll probably refrain from going into too much detail. And I'm aware of some efforts being made in that direction as well. In terms of ideaForge, looking at that vector, at this point in time, we are not directly looking at building a kamikaze system. We are largely focused on ISR capabilities. And always, we're looking at multi-role assets that can also do precision payload delivery and other capabilities.