In April 2024, the US and Japan introduced a resolution to the United Nations Security Council (UNSC) seeking to prohibit the deployment of nuclear weapons in outer space.
This resolution underscored the obligations of the 115 states that are parties to the Outer Space Treaty, including the permanent members of the Security Council, to avoid placing any objects carrying nuclear weapons or other weapons of mass destruction in Earth’s orbit.
The US has maintained a significant technological edge in space, relying on satellite infrastructure for vital military operations, such as communication, navigation, and intelligence.
The establishment of the US Space Force in December 2019 marked a major milestone. It played a vital role in monitoring approximately 15 missile launches daily from various global hotspots, managing satellite deployments, and tracking space debris. The Space Force also oversees two newly launched robotic space planes
In 2021, Russia conducted a controversial anti-satellite missile test, resulting in the destruction of a Soviet-era satellite, and generating a significant amount of hazardous space debris.
The Ukraine-Russia conflict, which began in February 2022, further underscored reliance on space assets for military operations.
Shortly before Russia attacked Ukraine, malware spread through part of the KA-SAT network, resulting in disruptions to the satellite internet modems of 50,000 European users, including Ukrainian military units.
Over the past decade, China has rapidly expanded its satellite networks and launch capabilities, making it a significant player in space.
In 2022, China achieved a new record for space launches, becoming the world’s second most active space launch provider after the US.
Both the US and Chinese missions are shrouded in secrecy when it comes to spacetech. Yet both involve spacecraft that have the capability to conduct prolonged missions, transport and retrieve payloads, and return to Earth for refuelling, potentially making them potent weapons.
India’s burgeoning spacetech sector is often hailed as the next frontier for economic growth, with ambitious projections for its market size in the coming decade.
While government reforms and a vibrant startup ecosystem are propelling this vision, the journey is not without its significant challenges.
Understanding the key risks for private players, the government’s investment in R&D, and persistent policy bottlenecks is crucial for charting a sustainable course.
First, space ventures are inherently capital-intensive and have long gestation periods. Despite growing interest, attracting sufficient seed-stage and long-term venture capital remains a significant hurdle.
IN-SPACe is a single-window, independent, nodal agency that operates as an autonomous body in the Department of Space (DOS). It aims to facilitate technology access to private companies that still heavily rely on ISRO’s testing facilities, launch pads, and ground stations.
This dependency, at times, leads to bottlenecks, and increases operational costs due to limited availability or high charges.
Despite indigenous advancements, India’s spacetech sector still depends on imports for certain high-technology components and advanced electronic systems. This reliance impacts costs, supply chain security, and the pace of innovation.
Second, the specialised nature of space technology demands a highly skilled workforce in areas like aerospace engineering, astrophysics, and satellite technology. While India has a large talent pool, finding and retaining professionals with niche expertise can be challenging.
Indian private players also face stiff competition not only from a growing number of domestic startups but also from established global giants and well-funded international new-space companies. Maintaining competitiveness in terms of cost, quality, and innovation is a continuous challenge.
As space assets become increasingly critical for national security and economic activities, they become prime targets for cyberattacks. Ensuring the robust security of satellite data and communication links is a growing and complex concern.
The Indian government, primarily through the Department of Space (DoS) and ISRO, has been the traditional backbone of space R&D.
A significant portion of this budget supports ISRO’s ambitious missions, including deep space exploration and human spaceflight programs like Gaganyaan, as well as the development of advanced launch vehicles and satellite technologies.
While India has made commendable strides in opening up its space sector, addressing these risks and policy bottlenecks through a comprehensive legal framework, streamlined regulations, and sustained investment in both R&D and infrastructure will be critical.
This will not only empower India’s private spacetech companies to innovate and compete globally but also solidify India’s position as a formidable player in the evolving global space economy.
India’ mapping primarily has only two listed companies in the core business of geospatial, CE Info Systems (commonly known by the name of its app MapmyIndia) and Genesys International.
CE Info Systems offers location-based IoT technologies and AI-based solutions. These can be integrated with satellite data to provide enhanced services for fleet management, logistics optimisation, smart city initiatives, and more.
CE Info Systems is a crucial downstream player in the Indian space ecosystem. It takes the data and capabilities provided by ISRO’s infrastructure (like satellite imagery and NavIC signals) and transforms them into practical, marketable applications.
The company’s expertise in geospatial technology makes it a key enabler for the widespread adoption and commercialisation of India’s growing space capabilities.
A risk factor that has recently impacted investor sentiment is the decision to hive off the B2C (consumer-facing) business (Mappls) into a separate entity, managed by the founder’s son.
This move raised governance concerns among investors and proxy advisory firms, with questions about potential conflicts of interest and whether the terms of separation are fair to minority shareholders.
The concern is that the new B2C entity, even if funded by promoters’ personal funds, might benefit from the parent company’s resources and incubation without the public shareholders participating in its potential upside.
Investors worry that this restructuring could reduce MapmyIndia’s overall growth potential, as the high-growth consumer segment is no longer fully consolidated.
The new consumer-facing entity is expected to have significant cash burn in its initial stages, which, even if funded personally, can create an overhang or perception of risk related to the broader promoter group’s financial strategy.
The second company – Genesys International – specialises in photogrammetry, remote sensing, cartography, data conversion, and state-of-the-art terrestrial and 3D geo-content.
While Genesys has a healthy order book, the project-based nature of its revenue leads to significant lumpiness in the business. Delays in project execution or billing can significantly hurt revenue as the company has a very concentrated client base.
While both C.E Info Systems and Genesys have healthy operating margins, their net margins and return ratios need to find some stability.
Investing in Indian spacetech companies holds immense long-term potential given government support and burgeoning private participation.
Nevertheless, this requires a high degree of patience and diligent monitoring of evolving margins and return ratios. This is because the sector is still nascent, characterised by high R&D costs, long gestation periods, and significant upfront capital expenditure.
Until these companies achieve sufficient scale, consistent commercialisation of their technologies, and demonstrate a clear path to sustainable revenue generation and efficient capital deployment, their valuations may remain volatile.
Happy Investing.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
