Droneacharya Aerial Innovations Ltd Management Discussions

The following discussion is intended to convey managements perspective on our financial condition and results of operations for the financial year ended March 31, 2022. One should read the following discussion and analysis of our financial condition and results of operations in conjunction with our section titled "Financial Statements" and the chapter titled "Financial Information" on page 154 of the Draft Red Hearing Prospectus. This discussion contains forward-looking statements and reflects our current views with respect to future events and our financial performance and involves numerous risks and uncertainties, including, but not limited to, those described in the section entitled "Risk Factors" on page 20 of this Draft Red Hearing Prospectus. Actual results could differ materially from those contained in any forward-looking statements and for further details regarding forward-looking statements, kindly refer the chapter titled "Forward-Looking Statements" on page 15 of this Draft Red Hearing Prospectus. Unless otherwise stated, the financial information of our Company used in this section has been derived from the Restated Financial Information. Our financial year ends on March 31 of each year. Accordingly, unless otherwise stated, all references to a particular financial year are to the 12-month period ended March 31 of that year.

In this section, unless the context otherwise requires, any reference to "we", "us" or "our" refers to Droneacharya Aerial Innovations Limited, our Company. Unless otherwise indicated, financial information included herein are based on our Restated Financial Statements for Financial Year 2022 included in this Draft Red Hearing Prospectus beginning on page 154 of this Draft Red Hearing Prospectus.

BUSINESS OVERVIEW

Our Company was originally incorporated on March 10, 2017 as a Private Limited Company as "Droneacharya Aerial Innovations Private Limited" vide Registration No. 101287 under the provisions of the Companies Act, 2013 with the

Registrar of Companies, Bangalore, Karnataka. Subsequently, pursuant to a special resolution passed by the Shareholders at their Extraordinary General Meeting held on August 6, 2022, our Company was converted from a Private Limited

Company to Public Limited Company and consequently, the name of our Company was changed to ‘Droneacharya Aerial Innovations Limited and a Fresh Certificate of Incorporation consequent to Conversion was issued on August 23, 2022 by the Registrar of Companies, Bangalore, Karnataka. The Corporate Identification Number of our Company is U29308KA2017PLC101287.

Droneacharya Aerial Innovations Limited is a full-fledged innovative solution, based out in cultural and IT hub Pune, Maharashtra, with offices operating in Pune. The company was started off in 2017 by our founder and Chairman & Managing Director Mr. Prateek Srivastava with a vision to encourage multiple aspects of drones and GIS as a service.

Today, we provide high-end ecosystem of drone solutions for multi-sensor drone surveys, data processing of drone data using robust high configuration workstations, drone pilot training & specialized GIS training and manufacturing of customized 100% indigenous drones. Droneacharya offers all sorts of land surveying and underwater services. The team of talented and passionate creatives at Droneacharya are capable of handling projects of any scale and complexity as they have experience in more than 10 industrial domains.

The Company provides services of land and underwater surveying which includes Powerlines & Utilities, Oil & Gas Infrastructure, Mines and Quarries, Energy & Renewables, Roads & Highways, Urban & Rural Planning, Agriculture & Irrigation, Underwater Inspection and Underwater Bathymetry.

For detailed information on the business of our Company please refer to "Our Business" beginning on page numbers 102 of this Draft Red Herring Prospectus.

SIGNIFICANT DEVELOPMENTS SUBSEQUENT TO THE LAST FINANCIAL YEAR AND STUB PERIOD

As per mutual discussion between the Board of the Company and LM, in the opinion of the Board of the Company there have not arisen any circumstances since the date of the last financial statements as disclosed in this Draft Red Herring Prospectus and which materially and adversely affect or is likely to affect within the next twelve months except as follows:

The authorized capital of the Company has been increased from 50,00,000 to 30,00,00,000 by creation of 2,94,50,000 new Equity Shares of 10 each vide ordinary resolution passed at the Extra-Ordinary General Meeting held on April 27, 2022.

Change in status of the Company from private limited to public limited vide special resolution passed at the ExtraOrdinary General Meeting held on August 6, 2022.

The Shareholders of our Company approved appointed of Mr. Prateek Srivastava as Managing Director and Mrs. Nikita Srivastava as Whole-time Director & CFO in the Annual General Meeting held on September 30, 2022.

The Shareholders of our Company appointed Mr. Mangina Srinivas Rao, Mrs. Bhanupriya Nikhil Thakur and Mr. Utsav Jasapara as Independent Directors in the Annual General Meeting held on September 30, 2022.

The Board of Directors of our Company have approved raising of funds by way of Initial Public Offering vide its resolution dated August 27, 2022.

The Board of Directors of our Company have been authorised to raise the funds by way of Initial Public Offering vide special resolution passed at the Extra-Ordinary General Meeting held on September 3, 2022.

FACTORS AFFECTING OUR RESULTS OF OPERATIONS

Our business is subjected to various risks and uncertainties, including those discussed in the section titled "Risk Factor" beginning on page 20 of this Draft Red Herring Prospectus. Our results of operations and financial conditions are affected by numerous factors including the following:

Changes, if any, in the regulations / regulatory framework / economic policies in India and / or in foreign countries, which affect national & international finance. Government support and spending on entertainment industry;

Companys ability to adopt the changing technology in entertainment industry;

Companys results of operations and financial performance;

Performance of Companys competitors;

Significant developments in Indias economic and fiscal policies;

Failure to adapt to the changing needs of industry and in particular entertainment industry may adversely affect our business and financial condition; Volatility in the Indian and global capital market;

DISCUSSION ON RESULT OF OPERATION

Our Significant Accounting Policies

For Significant accounting policies please refer Significant Accounting Policies, under Chapter titled "Financial Statements" beginning on page 154 of the Draft Red Herring Prospectus.

Overview of Revenue & Expenditure

Our revenue and expenses are reported in the following manner:

Revenues

Revenue of operations

Our Companys revenue is primarily generated from DGCA drone pilot training services, Drone Building services, land and underwater surveying, 3D modelling, drone logistics.

Other Income

Our other income mainly consists of interest from banks.

				(Rs. In Lakhs)
Particulars	For the month ended June 30, 2022	For the period ended March 31,
		2022	2021	2020
Income
Revenue from operations	308.96	358.73	1.00	-
As a % of total Income	100.00%	99.99%	100.00%	-
Other Income	-	0.01	-	-
As a % of Total Income	-	1.00%	-	-
Total Revenue	308.96	358.74	1.00	-

Expenditure

Our total expenditure primarily consists of employee benefit expenses, Direct Cost relating to drone operations, Finance Costs and other expenses.

Employment Benefit Expenses

It includes Salaries and allowances, Contributions to provident and other funds, Gratuity, and other expenses.

Direct Cost relating to drone operations

It includes commission on enrolments, Drone Controller for training, Professional and consultancy Fees, Drone insurance & Repairs, Drone training fees, Discount, Contract and Rental Expenses.

Other Expenses

It includes Office Rent, Power, Roc Challan Charges, Travel Expense, Legal & Corporate Fee, Digital Advertising Expenses, Conveyance Expenses and others.

Finance Costs

Our finance costs mainly include finance charges and interest.

Depreciation

Depreciation includes depreciation and amortization.

RESULTS OF OUR OPERATION

				(Rs. In Lakhs)
Particulars	For the month ended June 30, 2022*	For the period ended March 31,
		2022	2021	2020
Incomes:
Revenue from Operations	308.96	358.73	1.00	-
% of total revenue	100.00%	100.00%	100.00%	-
% Increase/(Decrease)	-	35773.00%	-	-
Other income	-	0.01	-	-
% of total revenue	-	1.00%	-	-
% Increase/(Decrease)	-	-	-	-
Total Revenue	308.96	358.74	1.00	-
Variance	-	35774.00%	-	-

 

Particulars	For the month ended June 30, 2022*	For the period ended March 31,
		2022	2021	2020
Expenses:
Cost of Materials Consumed	0.03	4.01	-	-
% of total revenue	0.01%	1.12%	-	-
% Increase/(Decrease)	-	-	-	-
Direct Costs	29.46	73.30	-	-
% of total revenue	9.54%	20.43%	-	-
% Increase/(Decrease)	-	-	-	-
Other Expenses	89.27	36.58	1.69	2.29
% of total revenue	28.89%	10.20%	169.00%	-
% Increase/(Decrease)	-	2064.50%	-	-
Employee Benefit expenses	86.90	187.34	14.19	-
% of total revenue	28.13%	52.22%	1419.00%	-
% Increase/(Decrease)	-	1220.23%	-	-
Total Expense	205.66	301.23	-	-
% of total revenue	66.57%	83.97%	-	-
Variance	-	-	-	-
Profit before Interest, Depreciation and
	103.30	57.51	-	-
Tax
% of total revenue	33.43%	16.03%	-	-
Depreciation and amortization Expenses	6.16	1.80	-	-
% of total revenue	1.99%	0.50%	-	-
% Increase/(Decrease)	-	-	-	-
Profit before Interest and Tax	97.14	55.71	-	-
% of total revenue	31.44%	15.53%	-	-
Financial Charges	0.07	0.15	0.01	0.01
% of total revenue	0.02%	0.04%	1.00%	-
% Increase/(Decrease)	-	1400%	-	-
Profit before Tax and Extraordinary
	97.07	55.56	-	-
Expenses
% of total revenue	31.42%	15.49%	-	-
Extraordinary Expenses	-	-	-	-
% of total revenue	0.00%	0.00%	-	-
% Increase/(Decrease)	-	-	-	-
Restated Profit/(Loss) before tax	97.07	55.56	-	-
% of total revenue	31.42%	15.49%	-	-
% Increase/(Decrease)	-	-	-	-
Tax expenses/(income)
Provisions for Tax	25.57	14.59	-	-
Provisions for Deferred Tax	-0.56	0.32	-	-
Total tax expenses	25.01	14.91	28.19	18.21
% of total revenue	8.09%	4.16%	2819.05%	-
Restated profit/(loss) after Tax	72.06		-	-
		40.65
% of total revenue	23.32%	11.33%	-	-

* Figures for the three months ended June 30, 2022 were not compared with full year figures as same are not comparable.

REVIEW OF OPERATIONS FOR THE PERIOD ENDED JUNE 30, 2022

Income from Operations

Our revenue from operations for the period ended June 30, 2022 was Rs. 308.96 Lakhs which was about 100% of the total revenue and which includes revenue from DGCA drone pilot training services, Drone Building services, land and underwater surveying, 3D modelling, drone logistics.

Other Income

Our other income for the period ended June 30, 2022 was NIL.

Expenditure

Cost of materials consumed

The Cost of materials consumed for the period ended June 30, 2022 were Rs.0.03 Lakhs which was about 0.01% of the total revenue and which includes purchanse of spare parts of drone.

Employee Benefits expenses

The employee benefits expenses for the period ended June 30, 2022 were Rs. 86.90 Lakhs which was about 28.13% of the total revenue and which includes Salaries and allowances, Contributions to provident and other funds, Gratuity, Staff welfare expenses and other expenses.

Other Expenses

The employee benefits expenses for the period ended June 30, 2022 were Rs. 89.27 Lakhs which was about 28.89% of the total revenue and which includes Office Rent, Power, Roc Challan Charges, Travel Expense, Legal & Corporate Fee, Digital Advertising Expenses, Conveyance Expenses and others.

EBIDTA

Our EBITDA for the period ended June 30, 2022 were Rs. 103.30 Lakhs.

Financial Costs

Financial costs for the period ended June 30, 2022 were Rs. 0.07 Lakhs which was about 0.02% of the total revenue andwhich consists of finance charges and interest.

Depreciation

Depreciation for the period ended June 30, 2022 were Rs. 6.16 Lakhs which was about 1.99% of the total revenue and which consists of depreciation and amortization.

Profit /(Loss) after Tax

PAT for the period ended June 30, 2022 was Rs. 72.06 Lakhs.

FISCAL YEAR ENDED MARCH 31, 2022 COMPARED WITH THE FISCAL YEAR ENDED MARCH 31, 2021

Income

Total revenue has increased by Rs. 357.73 Lakhs and 35773.00% from Rs. 1.00 Lakhs in the fiscal year ended March 31, 2021 to Rs. 358.73 Lakhs in the fiscal year ended March 31, 2022. The increase in revenue was on account of increase in operation and new training programme offered by the Company.

Expenditure

Total Expenditure increased by Rs. 287.29 Lakhs and 1807.99%, from Rs. 15.89 Lakhs in the fiscal year ended March 31, 2021 to Rs. 303.18 Lakhs in the fiscal year ended March 31, 2022. Overall expenditure was increased mainly due to increase volume of operations and new training programme offered by the Company.

Cost of Materials Consumed

Cost of Materials Consumed in terms of value increased from NIL in the fiscal year ended March 31, 2021 to Rs.4.01 Lakhs in the fiscal year ended March 31, 2022. Cost of Materials Consumed was increased due to increase in volume of operation.

Employee Benefit Expenses

Employee Benefit Expenses in terms of value and percentage increased by Rs. 173.15 Lakhs and 1220.23% from Rs. 14.19 Lakhs in the fiscal year ended March 31, 2021 to Rs. 187.34 Lakhs in the fiscal year ended March 31, 2022. Overall employee cost was increased due to increase in no. of employees and increase in general increment in salary & incentives to employees.

Other Expenses

Other Direct Expenses in terms of value and percentage increased by Rs. 34.89 Lakhs and 2064.50% from Rs. 1.69 Lakhs in the fiscal year ended March 31, 2021 to Rs. 36.58 Lakhs in the fiscal year ended March 31, 2022. Other Direct Expenses was increased due to increase in volume of operation and training programme offered by the Company.

Profit before Interest, Depreciation and Tax

Profit / Loss before Interest, Depreciation and Tax has increased from Loss of Rs.14.88 Lakhs in the fiscal year ended March 31, 2021 to Profit of Rs. 57.51 Lakhs in the fiscal year ended March 31, 2022. Profit before exceptional & extraordinary items and Tax was increased due to increase in revenue from operations and training programme offered by the Company.

Finance Costs

Finance Costs in terms of value and percentage increased by Rs. 0.14 Lakhs and 1400% from Rs. 0.01 Lakhs in the fiscal year ended March 31, 2021 to Rs. 0.15 Lakhs in the fiscal year ended March 31, 2022. Finance Costs was increased mainly due to higher interest outgo on increased borrowings.

Depreciation & Amortization Expenses

Depreciation in terms of value increased by Rs. 1.80 Lakhs from NIL in the fiscal year ended March 31, 2021 to Rs.1.80 Lakhs in the fiscal year ended March 31, 2022. Decrease in depreciation is general in nature.

Net Profit after Tax and Extraordinary items

Net Profit has increased from loss of Rs.43.08 Lakhs in the fiscal year ended March 31, 2021 to profit of Rs. 40.65 Lakhs in the fiscal year ended March 31, 2022. Net profit was increased due to increase in revenue from operations and increase in operation and training programme offered by the Company.

FISCAL YEAR ENDED MARCH 31, 2021 COMPARED WITH THE FISCAL YEAR ENDED MARCH 31, 2020

As the operation of the Company during the financial year ended March 31, 2020 and March 31, 2021, were negligible, the comparision was not compareable.

INFORMATION REQUIRED AS PER ITEM (II) (C) (I) OF PART A OF SCHEDULE VI TO THESEBI REGULATIONS:

1. Unusual or infrequent events or transactions

Except as described in this Draft Red Herring Prospectus, during the periods under review there have been no transactions or events, which in our best judgment, would be considered unusual or infrequent.

2. Significant economic changes that materially affected or are likely to affect income from continuing operations

Other than as described in the section titled "Risk Factors" beginning on page 20 of this Draft Red Herring Prospectus, to our knowledge there are no known significant economic changes that have or had or are expected to have a material adverse impact on revenues or income of our Company from continuing operations.

3. Income and Sales on account of major product/main activities.

Income and sales of our Company on account of major products/ main activities derives from DGCA Drone Pilot Training services, Drone Building Services, land and underwater surveying, 3D modelling and drone logistics.

4. Whether the company has followed any unorthodox procedure for recording sales and revenues

Our Company has not followed any unorthodox procedure for recording sales and revenues.

5. Future changes in relationship between costs and revenues, in case of events such as future increase in labour or material costs or prices that will cause a material change are known

Our Companys future costs and revenues can be impacted by an increase in employee costs as the Company looks to hire talent with new skills and capabilities for the entertainment industry who may be in short supply.

6. Future relationship between Costs and Income

Our Companys future costs and revenues will be determined by competition, demand/supply situation, Indian Government Policies, foreign exchange rates and interest rates quoted by banks & others.

7. Extent to which material increases in net sales or revenue are due to increased sales volume, introduction of new products or services or increased sales prices.

Increases in our revenues are by and large linked to increases in the volume of business and increase no of student in our training programme.

8. Total turnover of each major industry segment in which the issuer company operates

The Company is operating in entertainment industry. Relevant industry data, as available, has been included in the chapter titled "Our Industry" beginning on page 90 of this Draft Red Herring Prospectus.

9. Status of any publicly announced new products or business segments

Our Company has not announced any new services and product and segment / scheme, other than disclosure in this Draft Red Herring Prospectus.

10. The extent to which the business is seasonal

Our Companys business is not seasonal. However, the business of the Company does depend on countrys economy situation and inflation.

11. Any significant dependence on a single or few suppliers or customers

Our Company was significantly dependent on top 10 customers. For further details refer the chapter titled "Risk factor" and "Our Business" on page 20 and 102 of Draft Red Herring Prospectus.

12. Competitive Conditions

We face competition from existing and potential competitors which is common for any business. We have, over a period of time, developed certain competitive strengths which have been discussed in section titled "Our Business" on page 102 of this Draft Red Herring Prospectus.

13. Capitalisation statement

For detailed information on Capitalisation Statement please refer Annexure 33 of Restated Financial Statements on page number 187 of this Draft Red Herring Prospectus.

The Company is operating in Drone Industry. Relevant industry data, as available, has been included in the chapter titled "Our Industry" beginning on page 90 of this Draft Red Hearing Prospectus.