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Summary: Kusumgar's IPO rests on a compelling defence manufacturing narrative, but a closer look at the business reveals several factors that deserve careful scrutiny. Before subscribing, investors should look beyond the headline growth story and assess whether the company's fundamentals justify its valuation.
India's defence manufacturing push has become one of the more reliable ways to sell a growth story to public market investors, and Kusumgar sits right at the centre of it. It makes the fabric used in military parachutes, stealth camouflage nets, and extreme-cold-weather gear, and is one of a handful of manufacturers doing this kind of work anywhere outside the US and China. That is the entire pitch.
Overall revenue fell 11 per cent in FY26. On its own, that is not unusual for a business built on lumpy defence orders. What is worth pausing on is where the decline actually sat, and where the offsetting growth came from. Aerospace and defence fabrics, the segment that carries most of Kusumgar's defence credibility, fell 42 per cent. The gap was papered over by two segments, neither of which had any credibility.
That is the part of this IPO’s story you cannot afford to ignore.
What Kusumgar actually sells
Kusumgar manufactures woven, coated and laminated synthetic fabrics built to extreme specifications: high tensile strength, complete waterproofing, resistance to flame and UV exposure. It also fabricates finished products from these fabrics. Production runs across six facilities in Gujarat and one fabrication unit in Uttar Pradesh, with combined capacity above 128 million metres.
Four segments make up the business. Understanding the difference between them is key to evaluating this IPO.
- Aerospace and defence fabrics (32 per cent) is the base fabric for parachutes, cold-weather gear and camouflage nets, built to military specifications. This is Kusumgar's core defence business.
- Aerospace and defence solutions (24 per cent) turns that fabric into finished products sold directly to defence and aerospace buyers. This includes assembled parachutes, camouflage nets, inflatable decoys and life-sized mock vehicles designed to mislead enemy surveillance.
- Industrial and automotive fabrics (23 per cent) sells fabric to non-defence customers for use in car parts, conveyor belts and rubber hoses.
- Outdoor and lifestyle fabrics (19 per cent) sells fabric to consumer brands for backpacks, jackets, tents and activewear. It is the most competitive and least specialised of the four.
Why competitors cannot simply walk in
The moat here is not a brand or a patent. It is trust, built in a category where a defect is not a customer complaint but a fatality. Once a fabric clears the defence and aerospace approval process, which can run two to ten years, it gets locked into a customer's design.
Kusumgar is one of the few manufacturers with expertise in fine denier yarns, extremely thin synthetic fibres that are prone to heat damage and uneven dyeing, and specialised polymers such as nylon. It also runs its value chain end-to-end, from weaving through coating, lamination and fabrication, keeping quality tight and proprietary designs in-house.
Kusumgar IPO details
| Total IPO size (Rs cr) | 650 |
| Offer for sale (Rs cr) | 650 |
| Fresh issue (Rs cr) | - |
| Price band (Rs) | 398-419 |
| Subscription dates | July 8 - July 10, 2026 |
| Purpose of issue | Offer for sale |
Post-IPO
| M-cap (Rs cr) | 4,399 |
| Net worth (Rs cr) | 503 |
| Promoter holding (%) | 75.7 |
| Price/earnings ratio (P/E) | 44.8 |
| Price/book ratio (P/B) | 8.7 |
Financial history
| Key financials | 2Y CAGR (%) | FY26 | FY25 | FY24 |
|---|---|---|---|---|
| Revenue (Rs cr) | 21.6 | 692 | 779 | 468 |
| EBIT (Rs cr) | 10.9 | 141 | 154 | 115 |
| PAT (Rs cr) | 7.9 | 98 | 112 | 84 |
| Net worth (Rs cr) | - | 503 | 258 | 140 |
| Total debt (Rs cr) | - | 288 | 302 | 119 |
| Cash flow from operations (Rs cr) | 28 | -155 | 201 | |
| EBIT stands for earnings before interest and tax PAT stands for profit after tax |
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Key ratios
| Key ratios | 3Y average (%) | FY26 | FY25 | FY24 |
|---|---|---|---|---|
| ROE (%) | 56.1 | 25.8 | 56.3 | 86.1 |
| ROCE (%) | 34.3 | 20.9 | 37.7 | 44.3 |
| EBIT margin (%) | - | 20.4 | 19.8 | 24.5 |
| Debt-to-equity | - | 0.6 | 1.2 | 0.8 |
| ROE is return on equity, ROCE is return on capital employed |
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The moat segment shrank. The commodity segment grew
Aerospace and defence fabrics fell from Rs 370 crore in FY25 to Rs 214 crore in FY26. The explanation is straightforward but not reassuring. A single order brought in Rs 205 crore in FY25. It did not repeat at the same scale, yielding only Rs 29 crore in FY26. One customer, one order, and the company's most credentialed segment lost nearly half its revenue, pointing towards the inherent lumpiness.
Aerospace and defence solutions fell 30 per cent to Rs 155 crore, after a customer deferred a large contract. Kusumgar did land a new order worth Rs 237 crore, but executed only 24 per cent of it during FY26. The remaining 76 per cent is expected in FY27, from a customer whose timeline has already slipped once.
| Market Segment (Rs cr) | FY26 | FY25 | FY24 |
| Aerospace and Defence Fabrics | 214 | 370 | 313 |
| Aerospace and Defence Solutions | 155 | 222 | 1 |
| Industrial and Automotive Fabrics | 165 | 113 | 111 |
| Outdoor and Lifestyle Fabrics | 125 | 57 | 29 |
| Other sales | 16 | 9 | 1 |
| Revenue | 675 | 770 | 456 |
The growth that offset both declines is the part that demands scrutiny. Outdoor and lifestyle fabrics more than doubled to Rs 125 crore. Industrial and automotive fabrics grew 46 per cent to Rs 165 crore. The company says both came from existing customers ordering more, not from new wins. So what actually drove FY26 growth was not new relationships, new markets or new applications. The segment that did the heaviest lifting is also the one where Kusumgar has the least pricing power.
Read together, the FY26 segment mix tells a specific story. The parts of the business worth paying up for shrank. The parts that resembled those of any other fabric manufacturer grew. The valuation asks investors to price the first type of business, while the financials largely reflect the second.
A factory that tripled, and now runs at half capacity
There is a capacity story sitting underneath all of this. Kusumgar's processing output capacity nearly tripled, from 49 million metres in FY24 to 128 million metres in FY25 and FY26, following the commissioning of its new Karanj facility. Total capacity utilisation fell from 94.3 per cent in FY24 to just 42.3 per cent in FY25 and 49.5 per cent in FY26.
The company does not break down utilisation by segment. What is clear is that Kusumgar built well ahead of demand. The growth in outdoor, lifestyle, and industrial fabrics may say as much about a company trying to fill idle capacity as it does about genuine commercial strength.
Moreover, trade receivables jumped from Rs 56 crore in FY25 to Rs 233 crore in FY26, more than quadrupling. The company attributed this to bulk parachute sales and service contracts recognised in the fourth quarter of FY26. As a result, despite reporting a PAT of Rs 98 crore in FY26, the company generated only Rs 28 crore of operating cash flow, implying a PAT-to-cash conversion of just 28.8 per cent.
An offer for sale amid rising debt
Total debt increased from Rs 119 crore in FY24 to Rs 302 crore in FY25, before easing slightly to Rs 288 crore in FY26. In FY25, the company breached a financial covenant, a ratio requirement embedded in its loan agreement, on a Rs 100 crore loan. Its current ratio, which measures short-term liquidity, fell below the contractually required level. The lender subsequently waived the breach.
Despite this backdrop, none of the Rs 650 crore being raised through the IPO will go into the business. The entire issue is an offer for sale, with all the proceeds going to the Kusumgar family. Rather than raising fresh capital to support growth or strengthen the balance sheet, the IPO provides an opportunity for the promoter family to monetise part of its stake.
What the price is actually asking you to believe
At 44.8 times FY26 earnings, there is no listed domestic peer in engineered defence and technical textiles to check this multiple against. The closest comparison, Garware Technical Fibres, trades at 35.9 times earnings. But the FY26 used to justify Kusumgar's premium is the same year its core defence segment shrank by more than 40 per cent. Two lower-margin commercial segments and a factory running at roughly half capacity held the numbers up.
For the valuation to hold, Kusumgar needs to prove that FY26 was a timing issue rather than a change in the quality of earnings. That means the defence businesses must once again account for the bulk of growth, while the commercial segments show that they are growing on underlying demand rather than filling excess capacity.
The grey market premium may drive listing-day sentiment, but these four variables will determine whether the investment case holds over time: defence revenue recovery, receivables converting to cash, execution of the deferred contract and utilisation of the expanded plant.
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