From Aryabhata and the PSLV to Chandrayaan and Mangalyaan, India’s space story was for decades almost synonymous with Indian Space Research Organisation (ISRO). That is beginning to change. In July, Skyroot Aerospace’s Vikram-1 became the first privately-developed Indian rocket to reach orbit, while a new crop of companies is building satellites, propulsion systems, imaging technologies and space-data businesses.
On its part, the Government of India has undertaken major reforms to transform the space sector into a private-sector-driven and globally-competitive ecosystem. The Indian Space Policy 2023 opened the sector to private participation, while IN-SPACe (Indian National Space Promotion and Authorisation Centre) facilitates and regulates non-government space activities. FDI rules were liberalised to permit up to 100 per cent foreign investment, with automatic-route limits varying across different space activities. A ₹1,000-crore venture capital fund and ₹500-crore technology adoption fund support start-ups and innovation are examples of government-backed funding initiatives. The government is also providing subsidised access to ISRO facilities, technology, satellite data and launch services, while promoting public-private partnerships (PPPs) and commercialisation.
Still for the average Indian, space exploration evokes images of rockets, moon/inter-planetary missions and astronauts. But for investors, rockets are only one part of a much larger business. Getting something into space is essential, but much of the economic activity happens before and after the launch too.
The global ecosystem includes companies that make rockets and satellites, manufacturers of propulsion systems (generates thrust to push a spacecraft forward), electronics and optics (enables satellite imaging, sensing and observation). Then, there are ground stations that communicate with satellites, satellite broadband providers and businesses that turn images and other data from space into usable information.
Elon Musk’s SpaceX, familiar to investors following its recent mammoth $86-billion IPO, illustrates how these businesses can connect. It makes rockets and satellites, launches its own Starlink constellation, manufactures user terminals and earns recurring connectivity revenue. It also provides launch and other services to external and government customers.
Many of India’s emerging pure-play space-tech companies are still unlisted today, but understanding their business models now can help investors assess them better if and when they enter public markets.
India’s ecosystem, admittedly, is more fragmented. Different companies occupy different portions of this chain. Understanding these differences is essential before treating them all as part of one “space-tech” investment theme. Read on.
Space is the region beyond Earth’s atmosphere where satellites and spacecraft operate. The conventional boundary is around 100 km (62 miles) above Earth’s mean sea-level, the Kármán line.
Think of ‘launch’ as effectively the transportation business of space. Large rockets can carry several customers together through “rideshare”. SpaceX, for instance, charges small satellite operators for space on scheduled launches. This can sharply reduce the cost per kg because many customers share the rocket. For context, a Deutsche Bank Research notes that SpaceX’s rideshare programme starts at about $350,000 for 50 kg, with additional mass priced at around $7,000 per kg. A rideshare drop-off may also not be the satellite’s final destination; onboard propulsion or an orbital-transfer vehicle may be required to move it to the desired altitude and orbital plane.
Smaller launch vehicles such as those being developed by Skyroot Aerospace and Agnikul Cosmos have a somewhat different proposition. A customer requiring a particular orbit or launch schedule can potentially pay more for a dedicated or more customised launch. The difference is somewhat like taking a bus against hiring a taxi. The bus is cheaper per passenger, but the taxi gives greater control over destination and timing. Dedicated launches typically cost more per kg but offer greater orbital and scheduling flexibility. For an expensive satellite, losing the payload can matter far more than saving on launch cost, making proven performance in previous space missions an important competitive hurdle for new entrants. Defence missions may also place a premium on sovereign access and security. This means a small launcher does not necessarily have to beat a much larger rocket on cost per kg. However, launch remains capital-intensive, and technological success alone does not establish that the business will generate attractive returns. For instance, SpaceX’s Space segment achieved sustained positive adjusted EBITDA only from 2018, around 16 years after the company was founded.
Satellite manufacturing is another business altogether. Companies can sell the satellite platform, or “bus”, which provides the structure, power, communications, thermal control and other basic systems on which a customer’s camera, communication equipment or other payload is mounted. Others can go further and supply complete satellites or manufacture standardised platforms for multiple customers. Component manufacturers sit a level deeper, supplying propulsion systems, electronics, antennas, optics, solar/power systems and precision-engineered parts. This gives component suppliers a different risk profile: they need not finance an entire constellation or bear the commercial risk of the end service, and can sell the same qualified subsystem across multiple programmes. Once a component has accumulated flight heritage and is designed into a platform, reliability and qualification requirements can also make switching suppliers less straightforward. This is potentially important for India, where much of the existing listed exposure to space already lies in such “picks-and-shovels”. The opportunity will depend not merely on more satellites being launched, but on whether Indian suppliers can increase indigenous content, move from build-to-print manufacturing towards proprietary subsystems, scale production and win export customers.
Then come communications and data. Satellite communications can combine an upfront hardware sale, such as a terminal or antenna, with recurring connectivity revenue. The customer base can extend well beyond households using satellite internet. Aircraft, ships, mines, pipelines, farms and other remote assets can use satellite links where terrestrial networks are unavailable or uneconomic to build. JPMorgan notes that in sectors such as maritime, logistics, mining and precision agriculture, geographical coverage rather than sheer network capacity can be the binding constraint. This gives satcom a different economic profile from manufacturing.
Once the constellation and ground infrastructure are in place, operators can potentially earn repeatedly from the same network through consumer, enterprise, government and machine-to-machine connections. But the model is also capital-intensive upfront, with satellites, launch, terminals, spectrum and ground infrastructure required before utilisation scales. Those revenues are recurring, but so is part of the capital requirement, since satellites eventually need replacement and networks require continuing capacity additions.
Earth observation, meanwhile, uses satellites to monitor the planet. The raw product may be an image, but the more valuable business can lie in what is extracted from it. A bank does not necessarily want pictures of farmland; it may want to know crop condition before making an agricultural loan. An insurer may want a flood-damage assessment. A mining company may want information on terrain or mineral characteristics, while a defence customer may want to know what has changed at a particular location.
The value chain can therefore move from image → processed data → analytics → intelligence → decision. A satellite operator can potentially sell information generated by the same orbital asset to multiple customers and industries. Companies that become embedded in customer workflows may also have greater recurring-revenue potential than those selling raw imagery alone. That, however, depends on whether the data is differentiated and useful enough to avoid becoming a commodity.
Source: Read the original article on www.thehindubusinessline.com