Tonbo Imaging IPO: Can defence sector tailwinds offset weak financials?

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Agencies

The promoter shareholding will fall to 14.6% after the IPO from 18.6%.

ET Bureau

Business

Incorporated in 2003, Tonbo Imaging is a defence electronics original equipment manufacturer that designs, develops and manufactures sensing, processing, communication and guidance systems for surveillance, reconnaissance, targeting and control. Its product portfolio includes handheld thermal binoculars, targeting systems, missile seekers, thermal imaging cores and cameras, weapon sights, fire-control systems and missile-guidance systems.

The company follows an asset-light business model, retaining product design, intellectual property and research and development (R&D) in-house while outsourcing manufacturing to third-party partners. Its Bengaluru R&D centre employed 130 engineers, around 38% of its workforce, as of June 30, 2026. It serves domestic and international defence customers in 24 countries.

If that is the product profile is, how does the financial look like?

As of June 30, 2026, it had a confirmed order book of ₹314.2 crore, of which domestic orders accounted for ₹231.87 crore. But the past revenue side has been a bit worrying. Revenue and profit declined in FY26 largely due to delays in executing international orders, which also weighed on its return ratios. Defence procurement is largely tender driven, with contracts often being non-recurring and limited visibility on repeat orders, creating uncertainty over future revenue.

Financials

Revenue from operations declined 22.7% to ₹362.7 crore in FY26 from ₹469.08 crore in FY25 due to delays in executing international orders amid the West Asia conflict. Operating margin before depreciation and amortisation (Ebitda margin) declined to 28.9% in FY26 from 29.7% in FY25. The margin was within the 26-48% peer range.

Net profit declined 30% to ₹50.9 crore from ₹72.8 crore during the period. Return on equity dropped to 9.8% in FY26 from 20.2% in FY25. Operating cash flow remained negative at ₹63.2 crore in FY26 though it improved from a negative ₹136.1 crore in FY25.

Valuation

At the upper price band, the company is valued at 78.7 times its post-issue FY26 earnings compared with Paras' 115.7, Data Patterns' 85.2, Zen Technologies' 68.5 and Bharat Electronics' 46. As the valuation is more than ten times the last fiscal revenue, there may not be much defence left for investors.