About CFF FLuid Control Limited

BUSINESS OVERVIEW

CFF Fluid Control Ltd. is engaged in the manufacturing and servicing of submarine machinery, critical component systems, and test facilities for Indian Defence PSU Shipyards. The company operates through a dedicated 6,000 sq. mtr manufacturing facility in Khopoli, Raigarh, exclusively catering to the “Scorpene” Submarine Program of India. This facility is equipped with state-of-the-art machinery and testing infrastructure, enabling in-house design, manufacturing, and servicing of fluid control systems, distributor and air panels, weapons and control systems, steering gear, propulsion systems, high-pressure air systems, hydraulics, breathing and diving air systems, and Integrated Platform Management Systems for submarines and surface ships.

An additional facility is under development at Chakan Industrial Area, Pune, intended for the production of critical systems like Towed Array Sonar, in collaboration with German partner Atlas Elektronik GmbH. Under this partnership, 12 Low-Frequency Variable Depth Sonars (LFVDS) will be produced for the Anti-Submarine Warfare (ASW) Shallow Water Craft (SWC) program of the Indian Defence PSU Shipyard. This collaboration with Thyssenkrupp Marine Systems’ division, Atlas Elektronik, marks a strategic step toward indigenization of critical defense equipment. 

As on March 31, 2025 the company had 245 permanent employees. The Banker to the Company is Axis Bank Limited.

INDUSTRY ANALYSIS

Defence Manufacturing Industry in India – Rephrased Industry Overview

India is recognized as one of the world’s most formidable military powers and holds significant strategic importance for its government. The defence manufacturing sector plays a vital role in strengthening national security and is composed of several key market segments, including military fixed-wing aircraft, naval vessels and surface combatants, and missile systems. Other major segments include rotorcraft, submarines, artillery, tactical communication systems, electronic warfare, and military land vehicles.

Leading Indian defence manufacturing entities include Bharat Earth Movers Ltd. (BEML), Bharat Electronics Ltd. (BEL), and Hindustan Aeronautics Ltd. (HAL).

Industry Growth Drivers

The sector is expected to expand rapidly due to rising national security concerns and ongoing border tensions with Pakistan and China, particularly over Kashmir and Arunachal Pradesh. These dynamics have driven demand for advanced defence equipment and technologies. India has been one of the top global importers of defence equipment over the past five years, aiming to gain a technological edge over its adversaries.

In an effort to reduce reliance on imports, the Indian government has launched several initiatives under the ‘Make in India’ program to promote indigenous defence production. The Ministry of Defence (MoD) has set an ambitious target to achieve a turnover of ₹217.18 crore (US$ 25 million) in aerospace and defence manufacturing by 2025, with ₹43,435 crore (US$ 5 billion) earmarked for exports.

Union Budget 2025–26 Highlights

• Total Defence Budget: ₹6.81 lakh crore (US$ 78.7 billion), a 9.5% increase YoY from FY 2024–25

• Capital Expenditure Allocation: ₹1.80 lakh crore (US$ 20.8 billion) for procurement of weapons, aircraft, and warships

• Border Roads Organisation (BRO): ₹7,146 crore (US$ 825.7 million) allocated for capital expenditure

• Defence Exports: Crossed ₹21,000 crore (US$ 2.43 billion) in CY24, with a goal of ₹50,000 crore (US$ 5.8 billion) by 2029

• As of October 2022, 595 industrial licenses were issued to 366 companies in the defence sector

• Defence exports increased by 334% in five years, with products now reaching over 75 countries

Market Size & Global Standing

• India ranks 4th globally in firepower, with a Global Power Index score of 0.0979 (where 0.0 is the ideal score)

• Target set to achieve ₹3,00,000 crore (US$ 34.7 billion) in defence manufacturing by FY29

• India’s defence exports touched ₹21,000 crore (US$ 2.43 billion) in CY24

• Defence imports stood at US$ 463 million in FY20 and US$ 469.5 million in FY21

• India aims to become a US$ 5 billion defence exporter in the next five years

• As of 2019, India ranked 19th among top global defence exporters, supplying to 42 countries

Future Outlook

The Indian government is increasingly focused on innovation and self-reliance, with initiatives like Innovations for Defence Excellence (iDEX), which connects start-ups with defence stakeholders to develop advanced technologies. Through programs like Defence India Start-up Challenge (DISC), iDEX has created a robust innovation ecosystem involving incubators and entrepreneurs.

The defence sector presents massive investment opportunities across various segments:

• Aerospace: ₹4,32,700 crore (US$ 50 billion) in aircraft, helicopters, UAVs, avionics, and systems

• Shipbuilding: ₹3,28,852 crore (US$ 38 billion) in naval vessels, submarines, patrol boats, and support ships

• Missiles & Artillery: ₹1,81,734 crore (US$ 21 billion) projected in missile and artillery system investments

Summary

India’s defence manufacturing industry is rapidly transforming, driven by strategic needs, rising geopolitical tensions, and strong policy support. With increasing budget allocations, a push toward self-reliance, and initiatives to boost exports and innovation, the sector offers robust opportunities for domestic and global players across multiple high-tech verticals.

BUSINESS STRENGTHS

1. Robust Order Book & Financial Position: As of May 31, 2025, the company holds an order book of ₹51,396.87 lakhs, supported by a strong bidding track record and strategic focus on critical components for Indian Defence PSU Shipyards. Diversified expertise enhances project acquisition and profit margins.

2. High Entry Barriers in Defence Manufacturing: The defence sector demands zero tolerance for error, stringent quality checks, and long vendor qualification cycles, making it difficult for new entrants. Suppliers must undergo years of assessment and approval, creating a significant competitive moat.

3. Strategic Focus on Naval Defence & Foreign Partnerships: Specialization in mission-critical submarine systems and partnerships with global OEMs like Atlas Elektronik GmbH support technological advancement. The company supports lifecycle requirements (up to 30 years) for platforms like the Scorpene submarines, strengthening long-term client relationships.

4. Experienced Leadership: Promoters Mr. Sunil Menon and Mr. Gautam Makker bring over 30 years of business experience and 20+ years in the defence sector. Backed by a skilled management team, the company is equipped to anticipate market trends, manage operations, and drive sustained growth.

BUSINESS STRATEGIES

1. Well-Funded Balance Sheet to Support Working Capital Needs: With a growing order book of ₹51,396.87 lakhs, the company ensures sufficient interest-free working capital to manage long production cycles, high inventory levels, and extended receivable periods typical in defence contracts. Proceeds from the proposed FPO are aimed at strengthening long-term liquidity and reducing dependency on debt.

2. Deeper Penetration into the Defence Sector: Focus remains on expanding order volumes, strengthening client relationships, and leveraging India's growing defence ecosystem. With the 2025–26 Union Budget allocating ₹6,81,000 crore and targeted ₹3,28,852 crore opportunities in shipbuilding, the company is well-positioned to increase market share amid the push for 70% self-reliance in defence by 2027.

3. Enhancing Operational Efficiency & Adopting New Technologies: Continued investment in advanced manufacturing technologies, cost optimization, and quality improvements will support production efficiency, reduce downtime, and help meet global defence standards, ensuring sustained client satisfaction and competitive advantage.

BUSINESS RISK FACTORS & CONCERNS

1. Geographical Concentration Risk
The company’s existing and upcoming manufacturing facilities are concentrated in Khopoli and Pune, Maharashtra, making operations vulnerable to regional disruptions such as natural disasters, power failures, industrial accidents, or pandemics. Events like the COVID-19 lockdown significantly impacted operations and utilization levels.

2. Client Dependency Risk
A significant portion of revenue is derived from contracts with Indian Defence PSU Shipyard, accounting for nearly all income over FY 2022–23 to FY 2024–25. Any decline in orders, budget cuts, or change in procurement strategy could adversely affect revenue and operations.

3. Technology Dependency Risk
Business operations are highly dependent on foreign technology and process know-how for specialized defence components. Key technologies have been acquired from Coyard (France) for submarine systems and Nereides (France) for Towed Wire Antenna (TWA). An investment of ₹1,036.76 lakhs has been made towards this technology, which is critical for production continuity.

CFF Fluid Control Ltd. faces key risks related to regional operational concentration, client concentration with Indian Defence PSU Shipyard, and dependence on foreign technology for core manufacturing capabilities. These factors could significantly impact business continuity and financial performance in case of disruptions or changes.