New Delhi, Sept. 1 -- For the better part of a decade, India has sought to reduce its dependence on foreign suppliers for defence equipment and build a domestic industry capable of designing, manufacturing and exporting sophisticated military technology. At first glance, this Bengaluru-based company is an almost ideal expression of that new defence economy. Tonbo Imaging designs and manufactures electro-optical and infrared systems, thermal imaging equipment, weapon sights, targeting systems, missile seekers and other sophisticated sensing and guidance technologies. It has built an international customer base, with its products being deployed in 24 countries, and positioned itself squarely within the country's push for Atmanirbharta, or self-reliance. On the surface, it is precisely the kind of company that India has been trying to create - homegrown, technology-driven and increasingly global.
But there is another story buried beneath that one. It concerns where some of the components inside those systems come from, the role of a Singapore-based shareholder in Tonbo's commercial affairs and allegations disclosed in the company's draft prospectus concerning Chinese suppliers.
The consequential question is whether an Indian defence company can be considered genuinely indigenous when critical parts of its technology supply chain remain abroad and, in some cases, appear to run through China.
Trade-data platform Volza records more than 11,500 import shipments into Tonbo Imaging India from 226 suppliers. About 2,262 of those shipments, or roughly 19.65%, are attributed to China, while around 1,157 are associated with Singapore. This implies that China is a significant country of origin in Tonbo India's recorded activity. The identity of some of the suppliers matters too. Trade records identify Chinese optics companies, including Changchun Jstar Optics Co. Ltd. and Changchun Sunday Optoelectronics Co. Ltd., among Tonbo's trading relationships. That makes a closer examination of what Tonbo is importing and, more importantly, which components are coming from China hard to avoid.
For a company whose business is built around electro-optics and thermal imaging, such details are not incidental; rather, they can be among the most consequential components in the architecture of a modern military system. It is important to know which components originate in China. And, perhaps most importantly, does the company's public description of its indigenous capabilities give investors an adequate understanding of those dependencies?
Further, the ownership structure makes these questions more interesting. According to Tonbo's IPO documents, CEAQ Technologies Pte. Ltd., a Singapore company formerly known as Tonbo Imaging Pte. Ltd., held 26.77% of the company before the proposed offering. CEAQ Technologies Private Limited, the Indian group entity formerly known as Tonbo Imaging Private Limited, held another 17.74%.
Together, the two CEAQ entities represented more than 44% of Tonbo before the IPO. Tonbo's financial records also involve CEAQ in related-party transactions, which include the purchase of project material and equipment. The records do establish enough of the surrounding architecture to make the question legitimate - Tonbo imports from China; Chinese optics manufacturers appear among its trading relationships; CEAQ Singapore has commercial dealings with Tonbo; and CEAQ Singapore is also a substantial shareholder. The company's revised draft prospectus makes that scrutiny more pertinent. It discloses allegations concerning the procurement of critical components from Chinese original equipment manufacturers through CEAQ Technologies Pte. Ltd., alongside other allegations concerning the economics of certain contracts and the presentation of the company's order book. Tonbo has denied the allegations.
Also, the company's recent financial performance is considerably less exuberant than the broader defence indigenisation story. Revenue from operations rose to '469.08 crore in FY25 from '428.19 crore in FY24. In FY26, however, it fell to '362.65 crore. Profit after tax declined from '72.76 crore to '50.88 crore, while EBITDA fell from '139.06 crore to '104.62 crore.
In other words, revenue declined by roughly 23% and profit by about 30%. But it does mean that investors should ask more sophisticated questions than those concerning the size of Tonbo's order book. And this is particularly relevant when Tonbo is approaching the market with an offer that will not provide the company with fresh equity capital. The proposed issue is entirely an offer for sale comprising up to 18.09 million shares. Existing shareholders, including the two CEAQ entities, are among those selling shares. The public market is being asked to place a value on a business that existing shareholders are, in part, choosing to monetise. That makes the quality of the underlying business and the transparency of its economics all the more important.
India has been remarkably successful at changing the rhetoric around defence manufacturing. The country now speaks confidently about indigenous design, domestic production and defence exports. But "indigenous" is not a binary condition. India's strategic concern with China is that dependence on a geopolitical rival for critical technologies can become a vulnerability when circumstances change.
That is why the Ministry of Defence should be asking questions that are different from those of stock market investors. The government should want to know whether its supply is secure. That is why the most important questions surrounding the IPO may not be how large India's defence market will become, how much the company can grow or even at what valuation investors are willing to invest. It is, in fact, a more basic question: when India says it is building an indigenous defence industry, what, precisely, does "indigenous" mean? A public offering provides an unusually useful place to begin answering it. Because before investors decide what Tonbo is worth, they should first understand what is inside it.
Views expressed are personal. The writer is pursuing Master's degree in Business Law
Published by HT Digital Content Services with permission from Millennium Post.