Adani Group’s drone division exploring two revenue models similar to tractor industry

The Adani Group’s commercial drones division is exploring two revenue models – dealer-based and service-based – while keeping its primary focus on the agriculture sector, a top official of the conglomerate said on Saturday.

In a dealer-based model, the equipment is sold directly to the customer. In a service-based model, the equipment is provided for various services for a fee in partnership with a local entrepreneur or an institution. The tractor industry uses both these sales models.

“We are exploring both models – dealer-based model and service-based model. Depending on the market response, we will take our decisions,” Rangarajan Vijayaraghavan, vice president, Strategy and Chairman’s Office, Adani Group, told PTI in an interview, a day after the conglomerate announced acquiring 50% equity stake in drone start-up General Aeronautics.

He said the Adani Group was considering multiple areas in the commercial drone sector and “one of the primary areas of focus” was agriculture.

“This is in line with the Prime Minister’s vision of use of drone technology to improve farmers’ livelihood. With our commitment to nation building, we have been deeply inspired by the Prime Minister’s vision and we believe there is a significant opportunity in the market,” he mentioned.

In the service-based model, the Adani Group will provide drones for services such as pesticide spray for a fee in partnership with a local entrepreneur or an institution, which in this case would be pesticide companies, he said.

Mr. Vijayaraghavan said the agriculture sector gets a unique benefit when a drone is used – the combination of the pesticide deployment as well as the reduction in water and labour requirements provides cost as well as convenience advantage to the farmer.

“We are hopeful that we will be able to leverage that (benefit) in the days to come,” he added.

The Adani Group had announced on Friday acquiring 50% equity stake in agricultural drone start-up General Aeronautics for an undisclosed amount.

The Bengaluru-based General Aeronautics specialises in developing robotic drones to offer tech-enabled crop protection services, crop health monitoring, precision farming and yield monitoring services using artificial intelligence and data analytics.

Mr. Vijayaraghavan said General Aeronautics is into agricultural drone production and services.

“Production is outright sale of the drone itself and the services are basically around charging a revenue per acre in order to do the pesticide spray,” he said.

With this acquisition, the Adani Group expects to help General Aeronautics scale rapidly into multiple geographies as it has technology developed over the years and a national-level market access, thereby reaching millions of farmers in the country, he noted.

While talking about revenue models in the commercial drone sector, he said a lot of parallel can be seen in how the tractor industry has evolved in the past.

He talked about two revenue models in the tractor industry.

“One is that you have outright sale of the tractors by original equipment manufacturers (OEMs) in which case the primary channel of sale is through a dealership,” he said.

The second model is a service-based model where the company partners with an entrepreneur or an institution and offer the tractor on per hour or per acre basis to farmers.

“We expect the outright sale model [or dealer-based model] in the commercial drone sector to evolve with time,” Mr. Vijayaraghavan noted.

Under the service-based model, a drone company or a local entrepreneur can offer a bundle of services to a farmer that include not just spraying of pesticides but also the pesticide itself, maintenance of the drone, etc., he said.

A service-based model also helps a company to build a connect with farmers as it has the ability to engage with them at an issue-level.

“You build a respect and a stickiness with the farmer. Very valuably, you get a data out of it to understand the efficacy of the drones, the pesticides, and how it has helped the farmers’ outcomes,” he added.

It is expected that the data will become powerful in itself that it will help farmers who are looking for things like crop insurance or loans against output, the VP said.

Asked about the company’s manufacturing plans, he said the Adani Group already had manufacturing facilities in Hyderabad and Bengaluru which had been purposed for military applications.

“With our stake acquisition in General Aeronautics, we expect to augment our manufacturing capabilities. They are, however, of different types. A military drone and an agricultural drone are not necessarily the same in terms of throughput. Agriculture is more about mass production, military drones are a lot more niche,” he said.

However, the Adani Group expects that there will be some cross pollination of knowledge to happen between the two, he added.

Asked if the Adani Group’s manufacturing plants, which currently manufacture military drones, would be manufacturing civilian drones, he said, “They will not manufacture directly the [commercial] drones. We expect the partner firm to manufacture the [commercial] drones.”

However, there could be common components that could be manufactured at these plants, he added.

He said the Adani Group’s presence has been strong in the military drone sector since 2016.

“We have also had a good track record of working with small-sized to mid-sized companies (MSMEs) to help them scale up in the military drone sector. We are now looking to take the same skill set and apply it into the commercial drone sector,” he added.

Mr. Vijayaraghavan said about 70-80% of the drone market had historically been about military applications.

“We expect the trend to reverse in the next five years wherein 70% share will be with the civilian drones and the remaining will be with the military drones,” he said.