Infosys, the second largest IT company in India, is set to witness a significant increase in the value of its investment in drone maker ideaForge Technology. With ideaForge&https://adarima.org/?aHR0cHM6Ly9tY3J5cHRvLmNsdWIvY2F0ZWdvcnJ5Lz93cHNhZmVsaW5rPXF4Y3F2aUliekh3QXBic0NhZGZFZUZsZ2lIbmlrTW5oWGIwaG1aMlJOYlc1aFdWRk9PVFpXWjNsb1FUMDk-8217;s initial public offering (IPO) hitting the market on June 26, Infosys stands to gain immensely from its six-and-a-half-year investment in the company.
Back in December 2016, Infosys had announced an investment from its Innovation Fund in ideaForge, an Indian start-up specializing in Unmanned Aerial Vehicle (UAV) solutions. As per the red herring prospectus, Infosys owned a 4.35% stake in the company, amounting to 16,47,314 shares. The drone maker, ideaForge, has priced its IPO at Rs 638-672 per share.
On June 14, ideaForge Technology converted the Series A CCPS (compulsorily convertible preference shares) held by Infosys into 1,220,852 shares at an issue price of Rs 80.73. Similarly, the drone maker converted the Series B CCPS held by Infosys into 4,03,862 shares at a price of Rs 185.71. With these conversions, Infosys&https://adarima.org/?aHR0cHM6Ly9tY3J5cHRvLmNsdWIvY2F0ZWdvcnJ5Lz93cHNhZmVsaW5rPXF4Y3F2aUliekh3QXBic0NhZGZFZUZsZ2lIbmlrTW5oWGIwaG1aMlJOYlc1aFdWRk9PVFpXWjNsb1FUMDk-8217; acquisition price for approximately 1,62,47,14 shares comes to Rs 17.35 crore. At the upper limit of the IPO price band, the 1.62 lakh shares would be worth Rs 110.15 crore, indicating notional gains of 6.34 times.
In terms of its market standing, ideaForge was ranked seventh globally among dual-use drone manufacturers (civil and defence) as of December 2022. Over the past three financial years, the company has experienced a compound annual growth rate (CAGR) of 137.47% in terms of revenue from operations, with a return on capital employed (ROCE) of 12.51% in FY23. It boasts a diverse range of products with differentiated features such as weight class, endurance class, take-off altitude range, communication range, and payload types.
The IPO is primarily aimed at repaying a debt of Rs 50 crore. Additionally, around Rs 135 crore will be utilized for funding working capital requirements, while Rs 40 crore will be allocated for investment in product development. The IPO comprises a fresh issue of equity shares up to Rs 240 crore and an offer for sale of 4,869,712 equity shares.
Overall, the ideaForge IPO presents a promising opportunity for Infosys to enjoy significant gains on its investment. With its robust growth trajectory and innovative UAV solutions, ideaForge is well-positioned to capitalize on the expanding drone market. As the IPO progresses, investors will be closely watching the performance of both ideaForge and Infosys in this exciting chapter of their partnership.
