Tonbo Imaging India Ltd

The company designs thermal imaging, night vision and targeting systems for armed forces, ranging from rifle sights to missile seekers, and outsources volume manufacturing to Kaynes and Avalon. Tonbo’s ITAR-free products have won defence tenders in India and abroad, and the business earns healthy margins on a light asset base. Its revenue, however, depends on one-time government orders and has been uneven from year to year, and taken together over the last three years, the business has not generated cash from operations. At 39x EV/EBITDA, the issue is priced on the higher side. Investors with a thematic view on defence can look at the stock, while others may wait to see whether the company can strengthen its competitive moat. For now, we would stay on the sidelines from a long-term view and track how the company performs after listing.