What you must know about Drone Destination IPO

Drone Destination is a DGCA-authorized Remote Pilot Training Organization. Along with its sister company, Hubblefly Technologies, they have jointly developed an integrated drone eco-system built around drone manufacturing, certified training, services, and rent a drone services. Drone Destination Ltd is headquartered in New Delhi and backed by a well-experienced team of Aviation & Drone Experts with a combined experience of over 350 man years. Its flagship training centre is located at Manesar in Gurugram.

Drone Destination Ltd runs the largest network of DGCA-certified Drone Pilot Training Programs and has trained over 1,000 drone pilots; a unique record. It operates 8 Drone Hubs and plans to open another 150 Drone Hubs, over the next three years. These drone hubs will offer drones on rent, with certified pilots, drone enterprise solutions, repair, and maintenance support as well as specialised training. It has currently deployed 25 drone teams for conduct village level mapping across 3 major states of UP, Gujarat and Andhra Pradesh. Drone Destination plans to strongly reinforce the “Make in India” foothold within the burgeoning UAV industry.

Key terms of the SME IPO of Drone Destination Ltd

Here are some of the highlights of the Drone Destination IPO on the SME segment of the National Stock Exchange (NSE).

• The issue opens for subscription on 07th July 2023 and closes for subscription on 1th July 2023; both days inclusive.
   
• The company has a face value of ₹10 per share and the price band for the book built IPO issue will be between ₹62 and ₹65 per share.
   
• The fresh issue portion comprises the issue of 68 lakh shares, which at the upper end of the price band of Rs65 aggregate to a fresh issue component of ₹44.20 crore.
   
• There is no offer for sale component in the issue. Hence, the fresh issue of Rs44.20 crore is also the total size of the IPO issue of Drone Destination Ltd.
   
• Like every SME IPO, this issue also has a marketing making portion with a market maker allocation of 500,000 shares. Nikunj Securities and Share India Securities will act as joint market makers to the issue providing two-way quotes to ensure liquidity on the counter.
   
• The company has been promoted by Chirag Sharma and Shashi Bala and the promoter stake in the company stands currently at 85.14%. Post the IPO, being a fresh issue of shares, the promoter stake will be get diluted proportionately to 62.31%.
   
• The proceeds of the fresh issue will be deployed towards purchase of new drones, purchase of new vehicles, meeting capex needs and also for meeting the working capital needs of the company.
   
• While Narnolia Financial Services Ltd will be the lead manager to the issue, Maashitla Securities Private Limited will be the registrar to the issue.
   

Category quota allocation and IPO lot size for the IPO

Drone Destination Ltd has allocated 50% of the issue size for QIBs and the balance has been distributed as 15% for HNI / NII and 35% for retail investors. The break-up of IPO reservation in the IPO are as explained as under in the table.

 
The minimum lot size for the IPO investment will be 2,000 shares. Thus, retail investors can invest a minimum of ₹130,000 (2,000 x ₹65 per share) in the IPO. That is also the maximum that the retail investors can invest in the IPO. HNI / NII investors can invest a minimum of 2 lots comprising of 4,000 shares and having a minimum lot value of ₹260,000. There is no upper limit on what the HNI / NII investors can apply for. Here is the break-up.

Key dates to be aware of in the Drone Destination Ltd IPO (SME)

The SME IPO of Drone Destination Ltd opens on Friday, July 07th, 2023 and closes on Tuesday July 11th, 2023. The Drone Destination Ltd IPO bid date is from July 07th, 2023 10.00 AM to July 11th, 2023 5.00 PM. The Cut-off time for UPI Mandate confirmation is 5 PM on the issue closing day; which is the 11th of July 2023.

It must be noted that in ASBA applications, there is no refund concept. The total application amount is blocked under the ASBA (applications supported by blocked amounts) system. Once the allotment is finalized, only the amount is debited to the extent of the allotment made and the lien on the balance amount is automatically released in the bank account.

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Financial highlights of Drone Destination Ltd

The table below captures the key financials of Drone Destination Ltd for the last 3 completed financial years.

Data Source: Company DRHP filed with SEBI

What stands out about the company is the phenomenal growth in the top line which can be largely attributed to the rather low base of the company sales. Also, in the latest year, the company has achieved net margins of nearly 20%, which is quite appreciable in a new technology company at such an early stage. The ROE of the company stands at 14 times earnings, which makes the stock attractive at the price of ₹65 in the upper band.

Investors looking to participate in a stable new technology company can look at this IPO. However, a slightly higher risk appetite and a longer investment perspective would be called for.