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Drone maker ideaForge files for IPO: A side-by-side look vs DroneAcharya’s bumper IPO; issue size, more

Drone maker ideaForge Technology filed papers with capital markets regulator Sebi to raise capital via an initial public offering. The drone designer and manufacturer boasted of approximately 50% market share in Indian unmanned aircraft systems. The IPO comprises fresh issues of shares worth Rs 300 crore as well as an offer-for-sale (OFS), with the promoters and shareholders offloading 48.7 lakh shares with a face value of Rs 10 each. The proceeds from its fresh issuance to the tune of Rs 50 crore will be utilized for repayment/prepayment of certain debts, Rs 135 crore will be towards funding working capital requirements, and Rs 40 crore for investment in product development and general corporate purposes.

ideaForge Technology’s products and services range from UAVs, batteries, and communication systems to drone-related software and solutions, catering to customers’ applications for surveillance, mapping, and surveying. The firm’s debut on the bourses would be the first-ever listing of a drone manufacturing company. JM Financial and IIFL Capital are the book-running lead managers for the Infosys and Qualcomm-backed companies.

Over the last three years, ideaForge’s revenue from operations grew at 237.48% CAGR, and the company turned profitable in Q2FY23, driven by sales to the Indian defense sector. A 1Lattice Report referenced in the DRHP estimated that the drone industry is worth $21 billion, growing at a 20% CAGR. India’s drone industry seeks to establish itself as an important drone hub by 2030.

Drone startup DroneAcharya Aerial Innovations was listed on BSE SME platform in December 2022, listing at a bumper premium of 90%. DroneAcharya stock made its market debut at Rs 102 on the BSE, as compared to the public issue price of Rs 54. The scrip shortly after that rose to Rs 107 per share, up 98%. DroneAcharya’s issue size was approximately 12.5% of ideaForge’s issue size, clocking in at fresh issues of Rs 34 crore. The aerial innovations company provides a high-end ecosystem of drone solutions, such as training, surveys, data processing, and surveillance.

FY22 Revenue
DroneAcharya: Rs 3.59 crore
ideaForge Technologies: Rs 1,59.43 crore

FY22 Profit
DroneAcharya: Rs 40.65 lakhs
ideaForge Technologies: Rs 44 crore

Fresh Issue

DroneAcharya: Rs 34 crore
ideaForge Technologies: Rs 300 crore

OFS
DroneAcharya: Nill
ideaForge Technologies: 4,869,712 shares

Board
DroneAcharya: SME Board
ideaForge Technologies: Main Board

However, in its DRHP, ideaForge did not mention DroneAcharya among its peers. “There are no listed companies that exclusively undertake the manufacturing of drones. Hence, basis factors such as the scale of the business, exposure to the defense sector, manufacturing of electronics products, a proxy set of listed peers of MTAR Technologies Limited, Data Patterns (India) Limited, and Astra Microwave Products Limited have been identified for our Company,” stated the Mumbai-based drone manufacturer.

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India’s unwavering appetite for Russian crude oil lifts January inflows to record high

India’s appetite for Russian crude oil in January rose to unseen levels, continuing to remain above traditional middle eastern suppliers for the fourth month in a row, as refiners rushed to snap up plentiful cargoes available at a discount to other grades. From a market share of less than 1 percent in India’s import basket before the start of the Russia-Ukraine conflict, Russia’s share of India’s imports rose to 1.27 million barrels per day in January, taking a 28 percent share, according to energy cargo tracker Vortexa.

India, the world’s third-largest crude importer after China and the United States, has been snapping Russian oil that was available at a discount after some in the West shunned it as a means of punishing Moscow for its invasion of Ukraine. From a market share of just 0.2 percent in India’s import basket before the start of the Russia-Ukraine conflict, Russia’s share of India’s imports rose to 28 percent in January 2023.

Officials attending India Energy Week (IEW) 2023 here said India will continue to buy crude oil from anywhere in the world, including Russia, to meet its energy needs. The executive body of the European Union has asked its 27 member countries to cap the price of Russian oil at USD 60 as part of the West’s attempt to squeeze Moscow’s oil revenues and limit its ability to wage war in Ukraine while keeping global prices and supplies steady.

“Unlike Iran and Venezuela, there are no sanctions on buying oil from Russia. So, anyone who can arrange for shipping, insurance, and financing outside of the EU can buy oil,” an official said. The price caps are part of the EU’s plan to use its clout in insurance and shipping industries to crimp Moscow. “We will continue to buy oil from anywhere in the world, including Russia,” he said.

Under the price-cap system that kicked in on December 5, companies shipping Russian oil outside of Europe would only be able to access EU insurance and brokerage services if they sell the oil at or under USD 60. Industry sources said crude shipments being purchased by Indian companies were below the G7’s price cap of USD 60 per barrel.

“So for all practical purposes, if I can send a ship, cover insurance, and device a mode of payment, I can continue to buy oil from Russia,” an official said, explaining how the mechanism works. “All options are on the table.” For Russia to keep oil sales going, it and its buyers need to use ships, insurance, and financing outside the jurisdiction of the G-7. The US is comfortable with Russia selling its oil outside the cap but using non-Western shipping, insurance, and banking services, which will likely be more costly.

Russia’s market share in January was an improvement over 26 percent in December. Iraq, which was relegated to the second spot in October 2022, supplied some 20 percent of all the oil India imported. Saudi Arabia shipped 17 percent while the US improved its share to 9 percent from 7 percent in December. UAE supplied 8 percent crude. All three middle-east suppliers improved their market share by one percentage point each, which came at the expense of Africa, whose share fell from 9 percent to 6 percent in January.

The rising share of Russian crude sales to India has also taken a toll on the country’s appetite for African crude. This, combined with a tighter market structure, as well as increased volatility in freight markets has led to the share of West African crude dropping from 12.5 percent in 2021. Russian crude traded at a record discount of up to USD 40 per barrel in the aftermath of Russia’s invasion of Ukraine as key buyers in Europe shunned Moscow’s oil. The bulk of Russia’s crude exports flowed to refiners in Asia, with China and India being its key customers.

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ITC stock value moving to FMCG from cigarettes; proof, sharp rise after Budget 2023

ITC share price saw a volatile day of trade on Wednesday due to the tax hike in cigarettes, announced in Budget 2023. The ITC scrip saw a 6.6% fall intraday before soaring to a fresh 52-week high at Rs 365.65 on the BSE, up 3.7%. The tobacco giant continued to extend its gains on Thursday, gaining 7.4% over the course of two sessions. The share price traded at a discount of 0.5% at Rs 376.65 on Friday, ahead of its Q3FY23 earnings.

ITC shares rebounded on 1 February once the market calculated the overall tax increase will be a meager 2%. “Given the general inflationary environment and no-price hikes since the last two years, we believe ITC is likely to offset the impact of tax hikes through selective price hikes,” ICICI Securities said. As a result of this, HDFC Securities stated cigarette companies like ITC and its peers may see a relief rally.

ITC Stock Call: Share Price Target and Brokerage Calls

BNP Paribas

Buy
Target price: Rs 361.40

Axis Securities

Buy
Target price: Rs 410

IIFL Securities

Buy
Target price: Rs 380

Marginal hike on cigarette taxes, major relief on agri, farming, and FMCG businesses

However, the marginal tax hike isn’t the sole factor behind the cheery sentiment surrounding ITC. The positive announcements in the Union Budget that sought to thrust the agricultural sector forward have resulted in the discourse around ITC strengthening. IIFL Securities wrote that the announcements on millet and the focus on increased production in various agricultural sectors would be beneficial to ITC and they anticipate further upside movement.

More experts and analysts are moving away from the view of ITC being solely a tobacco giant, and are now recognizing its capacity across sectors, especially FMCG and hotels. As the Budget was announced, AUM Capital stated that the hike in agri credit target as well as the makeover of tourist destinations to be developed for tourists are positive for ITC.

“We expect the narrative around the ITC is getting strong on account of – 1) Stable cigarette volume growth led by market share gains and new product launches; 2) FMCG business reaching the inflection point as its EBIT margins expected to inch up from 7.7% in FY22 led by – effective implementation of WIMI strategy, driving premiumization, leveraging technology on demand and supply side; 3) Strong and stable growth in hotels, paperboard, and agribusiness,” said Axis Securities.

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