ideaForge Technology Limited (IDEAFORGE) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the ideaForge Technology Limited Q1 FY '27 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Parth Patel from MUFG Intime. Thank you, and over to you.

Thank you, and good morning. On behalf of MUFG Intime, I welcome you all to ideaForge Technology Limited Q1 FY '27 Earnings Conference Call. From the management side, we have Mr. Ankit Mehta, Chief Executive Officer and Whole-Time Director; Mr. Vipul Joshi, Chief Financial Officer and Whole-Time Director. I hope everyone had an opportunity to go through our investor deck and press release that we have uploaded on our exchange 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.

Management line, we cannot hear you.

Am I audible?

Yes, sir, you're audible now. Please go ahead.

Thank you. Good morning, everyone, and thank you for joining us for ideaForge's Q1 FY '27 Earnings Conference Call. I'm joined today by our CFO, Mr. Vipul Joshi and our Investor Relations team. I will begin with the highlights of the quarter, progress on our key developmental programs and how we are positioned for the year. After a muted FY '25, the Indian drone industry witnessed demand revival in FY '26, and many of our long-term bets and investments were materialized into our order book and financial performance. While FY '26 was a turnaround year after a short blip in FY '25, FY '27 so far has been about building on that foundation that we have created over the years. Quarter 1 marked a steady start to the year, supported by continued execution and advancement across key strategic developmental programs. Let me start with a few highlights. First, we delivered more than 20% of our FY '27 opening order book, recording revenue from operations of INR 68.6 crores and closed the quarter with a positive EBITDA. Second, we have made significant progress on our key developmental programs, advancement on combat capabilities like air-launched effects and fuel-hybrid long-endurance capability for ZOLT, the first technical demonstrator of YETI completing tethered hover test, multiple market-ready developments on FLYGHT CLOUD, improvements on EW resilience stack and DGCA Type Certification for our Q6 V2 GEO UAV. Third, our deployed UAV fleet crossed 1 million customer missions. These missions were carried out in some of the most challenging terrains and conditions, providing us with learnings that help us drive our product and technology development efforts. Fourth, we secured the capital required to fuel our next phase of growth, raising INR 500 crores through a qualified institutional placement and receiving a Letter of Intent for financial assistance of up to INR 151 crores for our middle-mile logistics UAV YETI under the Government of India's RDI scheme. Fifth, the demand environment moved in a positive direction with an announcement of INR 20,000 crore worth of drone procurements through Fast Track mode and substantial expanded delegation of financial powers to defense forces field commanders, signaling towards increased procurement activities in FY '27 and onwards. Let me take each of these forward. On the execution and order book front, we entered FY '27 with an opening order book of more than INR 300 crores, and our priority for the year is conversion of the opening order book into revenue. We delivered more than 20% of the same in the first quarter. We also reported a positive EBITDA, marking another quarter of improving financial performance. While global supply chain disruptions and component availability continue to pose challenges, we remain focused on completing delivery of the remaining order book of INR 256.8 crores by Q3 as per customer time lines. Coming to the technology and product side, our approach to new products and technology development has been to own the consequential technologies and deliver a complete solution to our customers. At ideaForge, we have always focused on engineering ownership on the layers that are most difficult to build and replicate and also turn out to be the most consequential for real missions and business health. The consequential technologies in the present context include resilient communication systems that can withstand jamming, resilient navigation systems that can operate despite jamming and spoofing attempts, secure command and control software, edge compute for intelligence and specialized mission payloads. This approach provides a significant cost advantage as compared to the competition's need to use state-of-the-art imported technology. It gives us technology sovereignty and reduces exposure to denial or withdrawal of technology and sabotage threats. It allows us to adapt faster when customer requirements evolve rapidly and retain control over the security and performance of the system. Along with this, we have built several layers of technology like BlueFire Touch ground control software for real-time mission control, FLYGHT app and FLYGHT web for remote drone flight requests and real-time monitoring and FLYGHT CLOUD for data storage, post processing, AI analytics, reports and automation to provide complete solutions to our customers. This enables customers to adopt secure and resilient mission-critical UAV platforms that can also deliver final outcomes without needing the customer to orchestrate between multiple providers for all of these necessary but complex layers. In Q1, we made significant progress in the development of combat drone capabilities like air-launched effects and fuel-hybrid long-endurance capability for ZOLT. We are also in advanced stages of developing combat capabilities like long-range strike platforms and loitering munitions along with our partners. With these new capabilities and our in-house strength around resilience communication infrastructure for collaborative autonomy, we would be targeting to participate in the upcoming large opportunities from Indian defense forces. YETI achieved its first technical demonstrator milestone, completing a tethered hover test with all subsystems integrated with the second technology demonstrator already in the design phase. Our Q6 V2 GEO received DGCA Type Certification, opening up advanced GIS use cases across large-scale mapping, urban planning and digital twin applications. Six of our UAV platforms are now type certified by DGCA. Furthermore, we developed and released market-ready capabilities on FLYGHT CLOUD, including automated video summaries, AI-enabled event annotation and event search and workflow automation for several use cases. This intelligence layer from FLYGHT CLOUD helps turn raw aerial data from hours of drone flights into insights that our customers can act on. In Q1, we also strengthened our electronic warfare resilience technology stack, extending our advantage in the ecosystem as more procurement programs make EW resilience and GNSS denied navigation mandatory. Our continuous development efforts on this front convert into a stronger competitive position. Many of these developments start as an experiment, which we have started to showcase through ideaForge Labs. In Q1, we showcased multi-UAV operations across mixed platform [ batteries ], air-launched effects where one platform deploys another mid-flight munition drop and tactical deployment trials. These are experiments rather than released capabilities, and that is precisely their purpose. Labs is our way to share that experimentation never stops at ideaForge. I'm elated to share that during the quarter, our deployed fleet crossed the milestone of 1 million customer missions. Across our fleet today an ideaForge drone takes off somewhere in the world every 2 minutes. These are real missions flown by real operators in challenging conditions from altitudes higher than the Siachen Glacier, temperature as low as those found near both the poles to the high temperatures of Middle East and the Thar Desert to operating in the coastal environments in the open sea. And now even in EW contested environments, each one has fed something back to our engineering and the choices we make in product development. With this field experience and a global patent portfolio of 112 patents filed, we continue to push the frontiers of UAV technology. To fuel all of these developmental efforts and our working capital needs, we have also strengthened the financial foundation of ideaForge. We completed a qualified institutional placement raising INR 500 crores with participation from marquee domestic and global institutional investors. The proceeds are directed towards product development, working capital and capability building. Separately, we received a Letter of Intent for assistance of up to INR 151 crores from the Technology Development Board for the advancement of our YETI program under the Government of India's RDI scheme. It is a low-cost long-term debt funding released against developmental milestones. We are among the first companies to be supported under this framework, which we read as a statement of where the [ countries ] or the country intends its [ sovereign tech ] capability to be built. The environment around us is becoming structurally more favorable and the procurement frameworks are also now aligned to faster and broader adoption of drones more than ever in our nearly 2-decade journey. On the capital procurement side, the reported opportunity pipeline is the largest our industry has seen. Public reports of INR 20,000 crores of drone procurement under the fast-track procurement route from the Indian Army are now seeing the light of the day with one opportunity in the RFP stage, others remain in the approval pipeline with the expectation of RFPs in the second half of the year. Further, the Defence Acquisition Council has cleared capital acquisition proposals worth INR 52,000 crores, including a jet-based kamikaze drone system and a naval shipborne unmanned aerial system, underscoring increasing importance of drones in the armed forces' plans. On the revenue procurement front, the Indian Ministry of Defence has nearly doubled the operational procurement limits for field commanders of Indian defense forces through revision of the delegation of Financial Powers to Defence Services 2026. We are also getting positive signals from the field, and we believe that this development would accelerate procurement activities in Q3 and Q4. We continue to see regular cycles on the civil side of the business that lean towards increased procurement activities in Q3 and Q4. Let me now take you through the financial performance for the quarter. Revenue for the quarter stood at INR 68.6 crores compared to INR 12.8 crores in Q1 FY '26. Gross profit stood at INR 33.6 crores compared to INR 7.9 crores in Q1 FY '26 with a gross margin of 49% in the quarter and 61.7% in Q1 last year. EBITDA stood at INR 4.3 crores compared to negative INR 15.1 crores in Q1 FY '26. PAT stood at negative INR 2.6 crores compared to negative INR 23.6 crores in Q1 FY '26. Our order book as of June 30, 2026, stood at approximately INR 256.8 crores. We plan to execute and deliver this order book by Q3. Our focus for the rest of the year centers around a few key areas. We continue to focus on executing the open order book aligned with customer time lines. We will deepen ownership of critical technologies while further strengthening our ability to deliver complete solutions to customers across platforms, payloads, software, analytics, services and life cycle support. And lastly, we will expand into combat drones, enterprise applications and international markets where our technology and operational experience provide a meaningful advantage. Thank you. We can now move to the Q&A.

[Operator Instructions] The first question is from the line of Dipen Vakil from PhillipCapital.

Sir, my first question is -- so first of all very elaborate opening remarks. And also one thing that I felt missing was a commentary on your U.S. operations. So if you can help us with the scale up that is happening in your export and U.S. operations and what kind of market and opportunity size can we expect from your U.S. operations? And if you can give us some number around it?

Thanks, Dipen. So from the U.S. operations side, our focus for the present time has been shifting to 2 areas. One is that we are working with our partner to operationalize the JV that we have signed up over there. And secondly, we have a couple of regulatory approvals that we need to get, particularly around Blue sUAS certification which is the work in progress because it's only after we get the certification, which has now become more open and application process as compared to earlier that we will be able to gain substantial progress on the defense and federal side of the house in U.S. So that's work in progress for us. And therefore, we are taking a little bit of time to fuel both the -- and work towards operationalizing the JV and the Blue sUAS certification. With respect to rest of the international market, we continue to look at partnership opportunities in Europe and Middle East, whereas in the [indiscernible] South America and Africa, we have live opportunities. We have our partners now looking to buy our what is known as not-for-resale units, NFR units. We have orders in for those as well now, but we are working towards increasing our presence in some of these geographies where we believe we can get more traction without the need for joint ventures alone.

Got it, sir. Sir any idea on the market size for the U.S. space? What kind of market and opportunities can we expect once we get those approvals and all the certification?

See, many U.S. programs that are coming up right now like the conflict programs around drone dominance, et cetera, most of them run into several tens of thousands of crores, tens of thousands of dollars at this point in time. In fact, I feel that at least one of the programs that is live right now is about a $30 million program, where they have many players who will be participating. So there are many such programs that are coming up here and again, there is a very rapid pace of adoption in defense right now that's happening there. And we are exploring towards participating in those, once these certifications, which do take time come through as well.

Okay. Got it, sir. Sir, my second question is on the lines of the order inflow that we expect going ahead, sir. Sir, while we have capabilities, we are field tested and at the same time we are getting funding from the government side of it also. But still from the government side, while there is a requirement, orders are not coming in. So where is the disconnect or where is the gap from the government expectations or from some criticality that order movement is slow, not only for you but the entire drone space as a whole? So can you help us understand that a little bit?

Dipen, like I mentioned, there are some opportunities that are already in the RFP stage. These are the large FTP opportunities, which have a specific cycle of conversion from approval at PPB to final order placement, whereas those large opportunities are in progress at various stages of approval within the armed forces. With respect to the run rate business on the revenue side where the Army commanders' power have been enhanced, typical cycle of that business when there is no EP-linked time line is roughly that they start fructifying around Q3 and Q4 time line itself. So that's typical unless and until there is an EP program running. So we'll expect a bunch of that at that time.

[Operator Instructions] The next question is from the line of [ Tushar Khurana from Peace Wealth].

Sir, my first question is regarding the -- there an article recently that was demonstrating that Indian armed forces have release RFI for 2,715 logistics drones. And as I understand, there is another company by the name of Blujaero which has also already very recently tested -- flight tested their logistic drone. So I want to understand how DSP is placed in that RFI that has been released by the Indian Army. And how different or similar is Blujaero logistics drone with the DSP, if you can add some comment on that?

So this RFP that has come out that has largely focused on the altitude at which they want to operate these systems, as I understand. They have not yet looked at or specified they are seeking information from the market as to what capabilities are available in the market to serve at these altitudes. So obviously, we will be responding to the RFI. However, in terms of your question around Bluj, in my opinion, there are not just Bluj, but there are a lot of people who have been delivering and demonstrating logistics drones across the Indian ecosystem. I think what will matter is that at what altitude can people operate these systems at and what is the max payload that they can carry and up to what distance can that payload be carried. For example, YETI, in my opinion, is the only platform in the world from whatever we have searched that is designed to take off at 6,500 meters takeoff altitude. No other platform that we are aware of has an ambition of this scale. Neither have we seen too many efforts that look at that altitude carrying up to 200 kgs. Now depending on the payload, the range of operation at 200 kgs might be restricted to 50 kilometers at a payload of 50 kgs might extend up to even 200 kilometers. So that is the kind of challenge that we have taken on YETI. So it is slated to be the most challenging yet the most, you can say, required platform because logistics in those altitudes is the hardest problem that our forces have to face every day. Our vision with YETI is to make the world flat and whatever high-altitude areas that exist in our country, if we can serve them from the Terai at the fastest possible pace with high capability like this, I think we would have really changed the ecosystem and the game.

That's great to hear. So just a follow-up on this. So how big opportunity size can this be for us if, say, the RFI, which has been released for 2,700 just to begin with, so what could be the opportunity size for us in this space for YETI?

See, [ Tushar ], the thing is that right now, it is at an RFI stage. We are not aware of what is the final specifications at what altitude that the customer finalized. All of it being required in the YETI domain may also not happen. Therefore, it may be too early to comment on that. I just know that if this converts into a fast track procurement case, budget for each fast track procurement case is up to INR 2,000 crores. That's what happened in a fast track procurement case and capital procurement does not have a budget limit. So it will depend on which mode this comes through, and that will define the budget for the opportunity.

Okay. And sir, my second question is regarding this first RFP that has already been -- like you mentioned in your presentation. So for which category of the drones is this RFP for and have we also bid for it? And are we going to bid for all the combat drones RFPs as well?

So this one particularly is centered around the hybrid variant of our ZOLT platform. And yes, we have participated in it. And we are also going to continue to put efforts towards participating in any combat-related platforms as well that come through. Within the category of systems that we build presently, we don't bid for each and every category. So some we will have to let go for sure.

And what is the size of this RFP which has been announced?

I think, again, it's an FTP opportunity. So my assumption is that the budget would be up to the value that I had mentioned. In terms of the opportunity itself, it's an ISR opportunity presently, this one.

Okay. And sir, it is heartening to see our current order book is 60% defense and 40% civil. But can you just help me understand the customers or whether it is government or private for the civil and in which segment are these civil orders for? That's my last question.

So this was not the split of our order book. This was the split of the revenue we delivered. And in terms of customers, it is split between a few customers on the homeland security side on the civil side and some private customers as well.

And the current order book is how much defense and how much civil?

That we don't disclose at this point in time, [ Tushar ], typically, but it's heavier towards defense.

[Operator Instructions] The next question is from the line of [ Nikhil Gupta from Vaayu Capital ].

My first question is on our combat capabilities. So I just -- it's still not clear to me that are we still focusing on air launching another combat from our existing platforms or adding missiles or munitions to our -- as a payload to our existing platforms? Or we are also working on increasing our capabilities towards developing airframes, which are variant of existing platforms like ZOLT and SWITCH?

Both, [ Nikhil ], both. We are doing both. There are variants that we are creating of our quadcopter platforms that can act as Kamikaze systems as well as we are doing the evolution on the air-launched effects. So if you look at the air-launched effects, it's another drone only carrier munition, which will go and do the mission. So essentially, when we do that, we are developing an airframe that can actually go and act like a Kamikaze system as well. So -- I mean, when we do one, we do both as well. That's what happens.

Right. So the last question is on our inorganic growth. So now we have like done the QIP and also we can see that there is a lot of tailwinds in the industry and there's a lot of participation. So are we looking on any inorganic growth? I mean, there are a few companies which may have similar DNA as ours, and we may lack some capabilities. So I think we should go for some inorganic growth in that segment so that we can add our capabilities. So just wanted to know your opinion and your thoughts on the broader sense.

We are open, [ Nikhil ]. If we find a partner with the right mindset, the right capability depth as well as the right value for the market, we are open. As you can see, the combination of the 3 is harder to find. And therefore, we continue to evaluate, but there is no specific target that we have in mind that fits both of -- all 3 of these because -- see, we build from first principles. And to build from first principles is a slightly harder problem than to system integrate capabilities that others have built.

The next question is from the line of [ Rajveer Singh from Vivek Investment Managers ].

My first question is on the combat drones and loitering munitions and long-range strike platforms that you've spoken about. Can you help us understand whether these are still primary R&D and development programs or whether you are already seeing identifiable procurement opportunities and customer requirements? That is my first question. And my second question is that can you build a software plus autonomy mode? I mean hardware can potentially become commoditized. So where do you believe ideaForge's strongest long-term moat will reside, whether it will be in EW resilience, autonomy, communication, software or system integration? So your thoughts on this?

Thanks, [ Rajveer ]. ideaForge, we decide to go after a domain. And once you decide to go after a domain, there are some experiments that you do to build foundational capability of that domain. And there are specific projects and programs that you deliver that will basically meet some of the customer requirements that are visible to us in the domain. So you will see that our development is a mix of both. The platforms that we intend to release and develop need to be ones that we are aware of our customers wanting to deploy and therefore, they have that developmental effort. However, to initiate the development of a domain, you run some experiments which allow you to develop familiarity with the domain and that you choose to do in the fastest possible way. So that's a mix of how development typically happens in any new domain for us. In terms of our moat, like I very clearly articulated during the call as well, my speech as well that ideaForge looks at moat in 2 domains, right? One domain is, in terms of hardware, what are the technologies that are not yet commoditized? And do we have control over those technologies or not? Are we going to pay a disproportionate premium to the market for acquiring those capabilities? Or can we build them ourselves? Today, I'm glad to report that we own most of the consequential technologies along with having spent years building the technologies that were consequential at that point in time. For example, when we started ideaForge, there was no autopilot company that could give us an autopilot that we could use. And nothing was available in open source. So we built our own autopilot. We built our own regular communications [Audio Gap] and communication. So today, we own communication, which is noncommoditized. We own GNS denied navigation, which is noncommodized, and we own payload, which is a specialized domain as the class of the platforms goes up. So we own the consequential parts of what is going inside a drone. So we continue to keep a tap on what else could cover, [Audio Gap] which is not yet commoditized. Secondly, with respect to intelligence, there is no debate in my mind that ultimately, we need to deliver an outcome to the customer. The customer is not getting their outcome merely by operating a drone. And therefore, the intelligence that enables and the orchestration that delivers a mission to the end customer, the mission outcome to the end customer is another stack that we've worked progressively on, and we now have a pretty robust stack for a few use cases that is also delivered now because we have that stack, we deliver it as a drone as a service as well in many places. So we are a mix of both. And I think both are important for a business like ours because while the technology will get commoditized in pieces, we will always continue to look at where the puck is going rather than where the puck has been to try and contain and retain more that is necessary for the market. It helps us in building tightly integrated, better performing, more reliable solutions for our end customers.

[Operator Instructions] The next question is from the line of Neelotpal Sahu from JM Financial.

Congratulations on the strong execution. I just wanted your thoughts on the ordering prospects. So how much of these prospects do you see converting like in the near term in '27 -- FY '27? Or do you see most of them getting pushed out to '28 and '29 given that they are still at the approval stage? And if you can quantify some of it?

See, we are expecting a lot more outcome from the revenue programs and the run rate programs in the present year. There are certain other opportunities which are not linked to any specific opportunity that again have visibility for the year. In terms of the programs around fast track procurement, some of them as they get to RFP towards the end of the year, we will see a slip into FY '28 for some of them. For at least a couple of them, we expect that the outcomes may happen within this year itself.

So what in your assessment could be a ballpark quantum of inflows that you convert to orders for the year?

That we are not presently projecting, Neelotpal.

Understood, sir. Understood. Also, I just wanted to understand since we did deliver a very strong execution in a challenging environment, are we seeing any major supply chain constraints in executing our sort of order book by Q3 or those are largely procured?

So due to the current ongoing geopolitical conflicts, there is a pressure on the supply chain of thermal cameras and the electronic supply chain also is seeing a certain pressure where the time line delays are happening. We are reviewing them very closely and getting prepared for deliveries on time for our customer time lines.

Got it, sir. Got it. And also just one last question. Anything on exports that we see materializing in this year aside of the opportunities in the U.S. where we are still working on the certification?

Yes. So like I said, we have seen good interest from partners across the world right now. Many of them are investing in our NFR systems as well. And therefore, as we do more and more demonstrations and some of our live opportunities come to fruition as the year progresses, we should see some conversion. But I mean, we will continue to report as we get those orders in hand.

[Operator Instructions] The next question is from the line of [ Gaurav Choudhary ] from Systematix Group.

I'm Abhijeet Singh from Systematix. And sir, first question is versus having more and more capabilities in-house in terms of a drone, like you mentioned in the previous comment about having communication and certain payloads now that we are doing in-house versus, let's say, 5 years back, we might have been outsourcing them. So versus comparing these 2 scenarios wherein we have more and more capabilities in-house and have more of an integrated manufacturing, how do you see the competitive advantage in terms of bidding in both domestic and international markets from this perspective, having more and more your manufacturing capability for a drone? So if you can throw some color on how you think about this particular aspect?

So in terms of having more and more of our own capability, it is very important to understand that we essentially do that for reasons that we find that the capability that we are trying to acquire from our partners or other providers in the market is available at a very high premium that we believe our customers cannot afford in the long term. And therefore, we invest behind those capabilities. Number two, in terms of manufacturing and partnering with other partners across the globe, we are continuing to build a more open ecosystem around us. For example, we support third-party payloads on our platforms. We are -- in order to participate in a collaborative manner, we have a lot of variants we can create because we are happy to have our partners and their systems integrated into our systems if there are opportunities that require us to do that kind of a partnership. So we are not as concerned about it being a bottleneck for any of the expansion on other areas because we are open. We will partner with people with the right capabilities for the right applications. At the same time, having control over some of these things as a core part of what we do gets the benefits like we mentioned, we can be more competitive as well as we don't have dependencies that can cause denial or risk that usually some of these platforms have started to show up as in the global ecosystem and environment.

Yes, sir. Understood. Sir, what is the current level of indigenization that we have? Let's say, we do INR 100 product, what is the kind of value that gets imported for the components there? And how do we -- how much do we do in-house versus that?

Last year's number?