Future of Drones (Unmanned Aircraft Systems) in India: A 15-20 Year Investment Perspective
The unmanned aircraft systems (UAS) industry, is the the technology behind drones. It is still in its early stages (in India and abroad), but is gradually gaining momentum. Over the next 15-20 years, this industry is expected to evolve significantly. The growth will be driven by advancements in technology, increasing demand across various sectors, and evolving regulatory frameworks. From military applications to commercial uses like agriculture, logistics, and infrastructure inspection, drones are finding their way into more aspects of our daily lives.However, as with any emerging industry, there are uncertainties and risks. The regulatory landscape is still forming. The public perception around issues like privacy and safety could influence the pace of adoption. While new technologies (like UAS – drones) are promising, they also change quickly, which might impact long-term investments.In this blog post, my aim is to explore the factors, to get an in-depth understanding about if the drones/ UAS industry can align with one’s long-term investment goals. When I say long term, my time horizon is 15-20 years.I’ll also discuss a few Indian companies which are like new startups of this industry as of today. We’ll discuss them to see if it could be a viable addition to my portfolio. I’m not very optimistic (rather skeptical) about the future of UAS (drones). But this perception is mainly because I do not know about this emerging industry. Hence, I thought to explore it in my article.Do you know what attracted me towards this post? There is also a company listed in the Indian stocks market that make drones. We’ll discuss about this company as well (read here).Topics1. The Growth Story1.1 Emerging Use Cases:Military and Defense: UAS technology has long been utilized in military applications for surveillance, reconnaissance, and even combat roles. As countries continue to modernize their defense systems, the demand for advanced UAS is expected to grow.Commercial Applications: This includes sectors like agriculture (precision farming), logistics (drone deliveries), construction (site monitoring), energy (infrastructure inspection), and emergency response (disaster management). As these industries recognize the efficiency and cost-effectiveness of drones, the adoption rate is likely to increase.Urban Air Mobility (UAM): Concepts like drone taxis and cargo drones for urban areas are gaining traction. While these are still in the early stages, the long-term potential could be significant as technology matures and regulatory frameworks evolve.1.2 Technological Advancements:Battery and Power Innovations: Advances in battery technology could significantly extend flight times and load capacities. It is a very crucial technology on which drone’s future use cases are very dependent. If drones (UAS) have to become more versatile and efficient, battery power is its key.5G and Connectivity: The rollout of 5G networks will enable better real-time communication and control of drones. It will make the drones more reliability and suitable for use in critical applications.Automation and AI: Integration of AI with UAS for autonomous operations is likely to expand the range of applications. AI integration will make drones more efficient and capable of handling complex tasks without human intervention.2. Growth Projections of Drone IndustryThe unmanned aircraft systems (UAS) industry is poised for substantial growth over the coming years. The growth will be driven by technological advancements, expanding applications, and increasing investments. I think, in the coming decade, drones will become an integral part of the industry. Their use cases will be mainly in defense and logistics. Here is a take on the growth projections of the UAS industry:2.1 Industry Size: A Promising FutureHow is the current market looking like?As of now, the global UAS market is valued at several billion dollars. A significant portion of this market is concentrated in military and defense applications. However, the commercial segment is also catching up fast. It is fueled by innovations and broader adoption across industries like agriculture, construction, and logistics.The market is currently segmented into different types of drones. Different types of drones lie in a broad category of:Fixed-wing,Rotary-wing, andHybrid drones.Each of the above drones serve a distinct applications and industries. The demand for drones is highest in the defense sector. Demand from commercial and civil sectors are also expected to see a boost in the coming years.Projected Growth Rates:The Drone (UAS) market is projected to grow at a compound annual growth rate (CAGR) of 15-20% over the next decade.By 2035, the UAS market could be several times its current size. Analysts predict that the market could exceed $100 billion globally. It will encompass both military and commercial applications. This growth will likely be fueled by the integration of artificial intelligence (AI), advanced sensors, and improved battery technologies.2.2 Investment and R&DThe UAS industry (drone) has attracted substantial investments from venture capital firms, private equity, and government funding. These investments reflect a belief in the long-term potential of the industry.For instance, venture capital funding for drone startups has surged in recent years. Billions of dollars are being invested in companies developing innovative drone technologies. These startups are exploring new applications to build use-cases for drones. They are working on drone-based delivery systems, precision agriculture, and aerial surveillance.If drones become successful in these applications, they have the potential to disrupt traditional industries.Corporate and Government Funding:Established companies, particularly those in the aerospace and defense sectors, are also investing heavily in UAS technologies. These companies are expanding their drone offerings, developing new models, and enhancing existing platforms to meet the growing demand.Governments worldwide are recognizing the strategic importance of drones and are investing in research and development (R&D) to advance their military and civil capabilities. This includes funding for projects related to autonomous drones, swarm technology, and counter-drone systems.Focus on Research and Development:Significant R&D efforts are being made to overcome the current limitations of drones. One of biggest factors that limits the usage of drones are their flight endurance, payload capacity.Advances in battery technology, lightweight materials, and AI-driven autonomous systems are expected to enhance drone performance. Currently, a lot of research work in done in these areas.Collaboration between academia, industry, and government agencies is helping innovation in the UAS sector.I think, the UAS industry is on the cusp of significant growth. The market size expected to expand rapidly over the next decade and beyond. As more industries recognize the value of drone technology, the demand for UAS is likely to continue its upward trajectory.At present it a sector that looks like it will grow. But is it a sector where we retail investors can start investing? I think that stage has come. but we must be mindful of where we are investing. At this stage of technological advancement in an industry, many companies fail to survive.3. Regulatory Environment for DronesThe regulatory environment for drones, or unmanned aircraft systems (UAS), is a critical factor in the growth and adoption of this technology. As drones become more prevalent in various sectors, governments worldwide are working to establish clear rules and guidelines to ensure their safe and legal operation.Here’s a closer look at how global and national regulations are shaping the future of the drone industry:3.1 Global RegulationsInternational Civil Aviation Organization (ICAO):The ICAO, a specialized agency of the United Nations, plays a key role in setting global standards for aviation safety, including drones. The organization has been working on a framework to integrate drones into international airspace.The ICAO’s efforts include the development of the “Unmanned Aircraft Systems Traffic Management” (UTM) framework. It’s aim is to standardize how drones are monitored and controlled in different countries. This initiative is crucial for cross-border drone operations and international trade using drones.European Union (EU):The EU has been proactive in establishing a unified regulatory framework for drones across its member states. The European Union Aviation Safety Agency (EASA) introduced comprehensive regulations in 2020 that classify drones based on their risk levels and define rules for their operation.The EU regulations are divided into categories: Open, Specific, and Certified, each with its own set of requirements. These regulations aim to streamline drone operations across Europe, making it easier for businesses to expand their drone services within the EU.United States:In the U.S., the Federal Aviation Administration (FAA) is responsible for regulating drone operations. The FAA has implemented rules for commercial drone use under Part 107, which outlines requirements for drone pilots, operational limitations, and safety guidelines.The FAA is also developing a Remote Identification (Remote ID) system, which will require most drones to broadcast their identification and location. This is seen as a critical step towards safely integrating drones into the national airspace, particularly for operations beyond the visual line of sight (BVLOS) and in urban environments.3.2 National Regulations in IndiaDirectorate General of Civil Aviation (DGCA):In India, the DGCA is the primary body responsible for regulating drone operations. The DGCA introduced the Drone Rules, 2021, which replaced the earlier Unmanned Aircraft System (UAS) Rules, 2021. It simplified the process of owning and operating drones in India.The new rules categorize drones into different classes based on their weight and intended use. There are classifications like nano drones to large drones used for industrial purposes. These regulations aim to balance safety with the growing demand for drone technology in sectors like agriculture, logistics, and defense.Digital Sky Platform:India’s Digital Sky Platform is an online portal developed by the DGCA to facilitate the registration and regulation of drones. It serves as a single-window clearance system for drone operators. It enables them to obtain permissions, register their drones, and report incidents.The platform also supports the “No Permission, No Takeoff” (NPNT) policy, which requires drones to obtain clearance before each flight. This system is designed to prevent unauthorized drone operations and enhance airspace safety.Opportunities and Challenges:While India’s regulatory framework is opening doors for the commercial use of drones, it also imposes certain restrictions. The limitations are like no flying near airports, military installations, and other sensitive areas. These restrictions can sometimes slow down innovation and the broader adoption of drones.The establishment of clear regulations is also enabling businesses to explore new use cases. Businesses are exploring the usage of drones for delivery services and aerial surveys.4. Risks and Challenges in the UAS IndustryThe unmanned aircraft systems (UAS) industry holds great promise. But like any emerging sector, it faces several risks and challenges that could impact its growth trajectory. Investors and industry stakeholders need to be aware of these potential hurdles. Here’s an in-depth look at some of the most pressing risks and challenges:4. 1. Regulatory HurdlesWhile regulations are essential for ensuring the safe and legal operation of drones, they can also serve as significant barriers to entry and growth. Governments around the world are still in the process of establishing comprehensive frameworks for UAS operations.In some cases, regulations can be enabling, providing a clear path for commercial drone use, such as in agriculture or infrastructure inspection. However, in other cases, complex and restrictive regulations may slow down the adoption of UAS in certain markets. For example, stringent requirements for drone certification, operator licensing, and airspace permissions can make it challenging for startups and smaller companies to scale their operations.4.2 Social BarriersPublic perception also plays a critical role in the adoption of a new technology. One of the most significant concerns surrounding drones is privacy. As drones become more common, especially in urban areas, the public is increasingly worried about the potential for surveillance and data collection without consent.These concerns are particularly acute in residential neighbourhoods. Drones equipped with cameras could inadvertently capture images or videos of private property. The fear of being monitored by drones can lead to resistance from the public. This will eventually translate into stricter local regulations or outright bans on certain types of drone operations.4.3 Safety and Security FearsSafety is another major concern. Incidents involving drones, such as near-misses with manned aircraft or accidents in crowded areas, can generate negative publicity and fuel public fears about the dangers of UAS. High-profile incidents, like drones disrupting airport operations, can lead to a backlash against the technology, prompting regulators to impose stricter controls.Additionally, the potential use of drones for malicious purposes, such as smuggling contraband or conducting terrorist attacks, raises significant security concerns. Governments and the public alike are wary of the risks posed by rogue drones, which could lead to the implementation of more restrictive measures that limit the industry’s growth.4.4 CompetitionThe UAS industry is becoming increasingly competitive as more players enter the market. From established aerospace giants to nimble startups, companies are vying for a share of the growing drone market.This heightened competition can lead to price wars, reduced profit margins, and a race to the bottom in terms of cost-cutting, which could impact the quality and safety of products.Additionally, the global nature of the UAS industry means that companies are not only competing with domestic players but also with international firms. This intense competition can make it challenging for new entrants to gain a foothold in the market.4.5 Investment Risks:For investors, the fast-moving nature of the UAS industry means that long-term bets can be risky. While there is potential for high returns, there is also a significant risk that a company’s technology could be overtaken by newer, more advanced solutions.Companies must continuously invest in research and development to stay ahead of the competition. However, R&D is costly and can strain resources, especially for startups and smaller companies.5. Drone Manufacturing Companies in IndiaHere’s an overview of five drone manufacturing companies in India that are making significant strides in the unmanned aircraft systems (UAS) industry:5. 1 IdeaForgeIdeaForge is one of India’s leading drone manufacturing companies, known for its rugged and reliable UAVs. Founded in 2007 by IIT Bombay alumni, IdeaForge has developed a range of drones primarily used in defense, homeland security, and industrial applications. Their drones are known for their endurance, reliability, and ease of use. It is the first company from its industry that got itself listed in the Indian stock market. Website: https://ideaforgetech.com/Key Products: (1) Switch: A versatile drone capable of vertical takeoff and landing (VTOL), used extensively by the Indian defense forces. (2) Netra V Series: A micro UAV designed for surveillance and reconnaissance missions.Achievements: IdeaForge’s drones have been widely adopted by the Indian Armed Forces and various law enforcement agencies. The company’s focus on innovation and quality has made it a leader in the Indian drone industry.5.2 Asteria AerospaceAsteria Aerospace is another prominent player in the Indian drone market, focusing on both hardware and software solutions for UAVs. The company provides end-to-end drone solutions, including the manufacturing of drones and the development of software for data analytics. Asteria’s drones are used in a variety of sectors, including agriculture, infrastructure, and mining. Website: www.asteria.co.inKey Products: (1) Genesis: A drone designed for precision agriculture, enabling farmers to monitor crop health and optimize inputs. (2) Cygnus: A versatile drone for industrial inspections, capable of carrying various sensors for detailed analysis.Achievements: Asteria Aerospace has partnered with several government agencies and private companies, providing customized drone solutions for critical applications. The company’s emphasis on R&D has allowed it to develop cutting-edge drone technologies.3. Garuda AerospaceGaruda Aerospace is a Chennai-based drone manufacturing company known for its cost-effective and efficient UAVs. The company’s drones are used in various applications, including agriculture, disaster management, and infrastructure development. Garuda Aerospace is also known for its focus on social impact, using drones for humanitarian purposes, such as disaster relief and environmental monitoring. Website: www.garudaaerospace.comKey Products: (1) Kisan Drone: Specifically designed for agricultural applications, including crop spraying and monitoring. (2) Surveillance Drone: Used for security and monitoring purposes in industrial and public areas.Achievements: Garuda Aerospace has deployed its drones in several high-profile projects, including flood relief operations and the monitoring of large-scale infrastructure projects. The company’s innovative approach has garnered attention both in India and internationally.5.4. Aereo (Formerly:Aarav Unmanned Systems)Aereo is a pioneer in the commercial drone space in India, with a focus on industrial and geographic information system (GIS) applications. AUS develops drones that are used for high-precision mapping, surveying, and industrial inspections. The company’s drones are known for their accuracy and reliability, making them ideal for critical infrastructure projects. Website: www.aus.co.inKey Products: (1) Insight: A drone designed for high-precision 3D mapping and surveying, used in infrastructure development and mining. (2) Sparrow: A lightweight drone for quick and easy surveying, ideal for small to medium-scale projects.Achievements: Aereo has been a key player in several government and private sector projects, providing drone-based solutions for large-scale mapping and surveying. The company’s drones have been instrumental in various Smart City initiatives and infrastructure development projects across India.5.5 Thanos TechnologiesThanos Technologies is a newer entrant in the Indian drone manufacturing scene but has quickly made a name for itself with innovative UAV solutions. The company focuses on developing drones for specific industrial applications, including agriculture, surveillance, and logistics. Thanos Technologies aims to provide cost-effective solutions without compromising on quality and performance. Website: www.thanos.inKey Products: (1) Syena-H10 & Syena-H10i: Designed for precision agriculture, enabling efficient crop management and monitoring.Achievements: Despite being relatively new, Thanos Technologies has secured several partnerships and projects in the agriculture and logistics sectors. The company’s focus on innovation and practical applications has helped it establish a strong presence in the Indian drone market.ConclusionFor we stock investors looking at the unmanned aircraft systems (UAS) industry as a potential long-term investment, the outlook is promising but complex. Over the next 15-20 years, the UAS industry is anticipated to experience substantial growth. The growth will be fueled by technological advancements, expanding applications across various sectors, and increasing adoption.From agriculture and infrastructure to defense and logistics, drones are poised to become integral tools in many industries.However, it’s important to approach this industry with a balanced perspective.The UAS sector is still in its formative stages and faces significant risks that could impact its growth trajectory. Regulatory hurdles remain a major challenge.If I’m considering a long-term investment in a company like IdeaForge (NSE:IDEAFORGE, BSE:543932) it’s crucial to proceed with caution. Starting with a smaller investment could be a prudent strategy. This will allow me to monitor the company’s progress and the overall industry landscape. Over time, as regulations stabilize and the market matures, we can reassess our position and decide whether to increase your stake.For the time being, let’s go slow but it is a time to start.Suggested Reading:
