The company's business is cyclical, driven by geopolitics and government budget cycles, and tender-based procurement gives poor revenue visibility. Long procurement timelines and episodic emergency purchases make order inflows and revenue volatile. This may adversely affect financial stability, results of operations and the ability to secure financing for growth.

The company mostly wins short-term, non-recurring, tender-based contracts and earns no annuity revenue. Its largest customer contributed 54.74% of revenue in the three months ended June 30, 2026 and 57.07% in Fiscal 2025, while the top 10 customers contributed 77.83% in Fiscal 2026. Loss of key customers or tenders could adversely affect cash flows and results of operations.

The top ten suppliers accounted for a significant share of total expenses: 68.77% in Fiscal 2026, 35.46% in Fiscal 2025 and 67.49% in Fiscal 2024. The company has no long-term contracts with raw material suppliers and procures through purchase orders, so these relationships may not last. Loss of key suppliers could adversely affect business, cash flows and results of operations.

The company depends on a narrow global supplier base for critical components such as infrared focal plane arrays, OLED micro displays, high-performance optics and specialised coatings, concentrated in Europe, South East Asia and China. Critical components bought from international suppliers cost ₹970.54 million, or 54.67% of cost of goods sold, in Fiscal 2026. Scarcity, price rises, export controls or geopolitical disruption could adversely affect business and results.

Exports were 65.52% of revenue from operations in Fiscal 2025 and 48.61% in Fiscal 2024, mainly to Europe, before falling to 5.57% in Fiscal 2026. The business is exposed to adverse developments in the geographies it supplies, including export controls and geopolitical risk. Any such change could hurt cash flows, results of operations and financial condition.

The company operates in a highly regulated industry and needs several licences, registrations and approvals from central, state and local authorities. Delays in obtaining or renewing them, or breach of their conditions, could lead to suspension or cancellation of activities. This could adversely affect results of operations and cash flows.

Customers impose stringent quality and performance specifications through tender documents. Failure to meet them or delivery schedules can lead to order cancellations, recalls, liquidated damages, or warranty and liability claims. This could harm the company's reputation, results of operations and cash flows.

Customers require performance bank guarantees, typically 3% to 5% of order value and valid for 1 to 5 years, which can be invoked for quality defects or delivery delays. In Fiscal 2025, a customer invoked guarantees once over a missed R&D project timeline, leading to an expense of ₹7.52 million. Further invocations could adversely affect reputation, results of operations and cash flows.

The company's strength rests on owning its intellectual property, bought from CEAQ Singapore under five assignment agreements dated March 11, 2024, and on its brand. Failure to protect or enforce its trademarks, patents and brand identity could damage goodwill and competitive position. Royalty of ₹105.13 million was paid to CEAQ Singapore in Fiscal 2024, before the purchase.

Tactical systems contributed 59.55% of revenue from operations in the three months ended June 30, 2026, 58.37% in Fiscal 2026, 77.24% in Fiscal 2025 and 83.90% in Fiscal 2024. A fall in demand for tactical systems such as Arjun, Spartan and Bloodhound would adversely affect business, financial condition, results of operations and cash flows.