Aero Tech Limited (ATL) is a listed, cutting-edge drone manufacturing company committed to redefining the future of aerial technology. Established…

Aero Tech Limited (ATL) is a listed, cutting-edge drone manufacturing company committed to redefining the future of aerial technology. Established with a vision to empower industries through unmanned aerial solutions, ATL specialize in the design, development, and production of high-performance drones for a diverse range of applications including agriculture, defence, logistics, infrastructure monitoring, disaster management and cinematography. With a strong emphasis on innovation, reliability, and compliance with global aviation standards drones are built using advanced materials, intelligent flight control systems and proprietary Al-based analytics. ATL's in-house R & D team continuously works on enhancing payload capacity, flight endurance, automation features, and data integration capabilities to serve both commercial and governmental sectors effectively. ATL not only deliver aerial platforms but also complete drone ecosystems - from customized software solutions and remote pilot training to post-deployment support-enabling clients to achieve operational excellence and transformative growth through UAV technology. ATL is preparing to launch its new Compact Professional Drone model Aero X. Market research indicates that customers are willing to pay up to 1,20,000 for the drone. For businesses aiming to enhance operational efficiency, this small drone is a smart investment that delivers professional-grade performance at an accessible price point. The company aims for a 25% profit margin on the selling price. Initial cost estimates show a production cost of 95,000 per unit, which is higher than what is needed to meet the profit objective. ATL is currently in the development stage of the Product Life Cycle and is applying target costing to ensure long-term profitability from the launch phase. The R & D and marketing teams are working cross-functionally to reduce costs by redesigning components and sourcing materials more efficiently. Management anticipates that price competition will intensify once the product enters the growth stage requiring further cost efficiency. The company has identified the need to establish a new manufacturing facility dedicated to the production of its upcoming line of advanced drones. The existing infrastructure is optimized for current models and volume, but the new product -featuring enhanced payload capabilities. Al-powered navigation, and industry-specific configurations requires specialized equipment, advanced testing environments, and streamlined assembly lines. Setting up a separate facility will not only ensure efficient production but also maintain quality standards, accelerate time-to-market and support scalability in response to growing domestic and international demand. The company proposes to enter into a lease agreement for a new factory premises with Green Space Pvt. Ltd., in which Mr. Manish, a non-executive director of ATL, holds 20% equity stake. The lease is for a period of 3 years, with an annual rent of 60 crore, totaling 180 crore over the term. ATL's consolidated turnover as per the last audited financials is 1,500 crore, and its net worth is 500 crore. The transaction is not in the ordinary course of business and the terms are not comparable to market rates. The proposal is first tabled in the Audit Committee meeting, where Mr. Manish is also a member. The estimated project cost of the project is 10 crore. Instead of relying on traditional bank loans, ATL decides to issue bonds to raise the necessary capital. One of the main reasons was successfully issuing and repaying bonds can help improve an issuer's credit rating, which, in turn, lowers the cost of future borrowings. However, the costs involved in issuing bonds (underwriting fees, legal fees, rating fees, fees for trustee services etc.) is high and company management is trying to find a new technological way so that funds are raised at lower cost. One of the consultants suggested finding out a possibility of issuing bonds using blockchain technology. Initially everybody thought it is a vague idea but later on everybody realised that such issuance of bonds is possible provided legal and regulatory measures are taken care off. During the year, ATL issued unsecured, compulsorily convertible instruments (Debentures) convertible within 8 years amounting to 10 crore in fixed number of shares to a private equity fund GNH Capital. The company has recently secured a bulk export order from a European buyer for 500 units of their precision drones (Model: Scout-X). Each drone comprises critical imported components like sensors, brush-less motors, flight controllers, and carbon fibre propeller assemblies, which form a significant portion of the cost of production. To remain price-competitive and improve working capital efficiency, ATL applies for a Duty-Free Import Authorisation (DFIA) under the Foreign Trade Policy for importing the key input components used in the export product and received the same. These inputs attract Basic Customs Duty (BCD) @15% and IGST @ 18% at the time of import. Details: Description Quantity (units) Value per unit (₹) Main Raw Material 12,000 kg 500 Assemblies' soles 10,000 pairs 150 After manufacturing drones, company exported the same for 92.50 Lakh. Statutory Audit for the P.Y. 2024-25 is under process and the auditor, M/s GSB & Co., Chartered Accountants, has identified several irregularities and deficiencies in financial reporting and internal controls. Key observations included: (i) Loans and advances amounting to 2.5 crore were extended to various entities that had no identifiable business relationship with the company. These transactions lacked formal agreements and supporting documentation. (ii) Payments were made on behalf of directors towards personal expenses, indicating potential misuse of company funds. (iii) Goods valued at 1 crore were recorded as purchased in the books of accounts; however, no physical verification nor supporting documentation were available to substantiate the existence of such inventory. These findings raise significant concerns regarding the integrity of financial records, potential violations of corporate governance norms, and possible contraventions of the Companies Act, 2013 and applicable accounting standards. Audit of financial statements was finalised, and final calculation of tax payable is being done. Provisions of Minimum Alternate Tax get attracted and thus calculation of book profits is being done. Further ATL, governed by Ind AS, has provided the following details for the financial year 2024-25: (₹ in crore) Net Profit as per statement of Profit and Loss 200 Deferred Tax Liability debited to Profit and Loss Account due to Ind AS Transition 20 Revaluation surplus credited to Other Comprehensive Income (OCI) 15 Provision for doubtful debts debited to P & L Account 5 Fair value charges in Equity Investments credited to Other Comprehensive Income (OCI) 12 As per books of accounts As per Income Tax Act, 1961 Brought Forward Loss 30 25 Unabsorbed Depreciation 40 50