Kusumgar IPO Review

1. IPO Overview

The ₹650-crore offer is entirely an Offer for Sale (OFS) by promoter selling shareholders — Siddharth Yogesh Kusumgar, Sapna Siddharth Kusumgar, and the Siddharth Yogesh Kusumgar HUF. The company will not receive a single rupee. Pre-IPO promoter holding is 90.48 %.

The price band is ₹398–₹419 per share, with a lot size of 35 shares. The issue opens on 8 July 2026 and closes on 10 July 2026, with a mainboard listing on BSE and NSE.

2. What the company does

Kusumgar Limited is an engineered fabrics manufacturer. Unlike ordinary cloth, engineered fabrics are designed for specific jobs – they must be waterproof, fireproof, ultra-light, tear-resistant, or able to survive extreme cold. The company takes synthetic yarns (nylon, polyester, etc.) and weaves, coats, or laminates them into high-performance textiles. It then sells either the fabric itself or finished products made from it, such as complete parachute systems or camouflage nets.

1. Aerospace & Defence Fabrics – This is the heritage business. The company makes fabric for parachutes, tactical clothing, rucksacks, and stealth systems (e.g., camouflage nets). It is a major supplier to an Indian government customer and also exports.

2. Aerospace & Defence Solutions – Here the company assembles finished systems, not just fabric. Products include complete parachute packs (e.g., Combat Free Fall systems), inflatable decoys, and shelters.

3. Industrial & Automotive Fabrics – Fabrics for wire-harness tapes (used in cars), mechanical rubber goods (belts, hoses), inflatable rafts, and custom industrial solutions. This segment grew 46% in FY26, driven by export orders, and is more stable than the defence segments.

4. Outdoor & Lifestyle Fabrics – Performance fabrics for sportswear, rainwear, backpacks, luggage, and tents. The company supplies brands like Decathlon (via fabricators). This segment doubled in FY26, helped by the "China plus one" sourcing shift – global brands are seeking Indian suppliers.

5. Other Sales – A small portion from sale of yarn, chemicals, and job work.

Key point for retail investors: Nearly all sales are on purchase orders – there are no long-term contracts. The defence segments can swing wildly because they depend on the timing of large government orders. The FY26 decline was not a demand problem — the company booked a massive new order in A&D Solutions — but a timing/execution problem that shifts revenue into FY27.

3. Growth Prospects and Strategy

1. Rising defence spending globally and domestically — India's defence budget hit approximately US$88.8 billion in FY27, and global military spending reached US$2.9 trillion in 2025. The push for indigenous manufacturing under "Make in India" drives demand for domestic fabric suppliers.

2. "China + 1" sourcing shift — Global brands are diversifying supply chains away from China toward India. This directly benefits the Outdoor & Lifestyle Fabrics segment (Decathlon being a prime example) and the Industrial & Automotive segment.

3. Technical partnerships — The company has technology transfer agreements with DRDO (combat free fall parachute systems, extreme cold weather clothing, recovery parachute systems) and partnerships with a U.S. airborne-solutions company, a Taiwanese textile manufacturer, and a Swiss defence-products company. These create access to patented technologies and moats around specific contracts.

4. Government incentives — ₹165.29 million was received in FY26 under ATUFS, SGST reimbursement, SSTVC 2019, and other schemes.

The company's stated strategies for converting these drivers into growth are: (i) "build, retain, extend" for aerospace & defence; (ii) work closely with global brands to grow Outdoor & Lifestyle Fabrics; (iii) steadily grow Industrial & Automotive Fabrics through wallet share and customised solutions; (iv) focus on high-margin, high-barrier products; and (v) invest in capabilities, R&D, and automation.

Quantified customer activity:

New customers = not a customer in the prior two fiscal years.

Capacity utilisation and expansion –

The company has been adding capacity aggressively, but utilisation remains low:

The drop from 94.33% to 42.32% is due to the new Karanj facility commissioned in April 2024, which added 59.64 million metres of processing capacity and 21.30 million metres of coating capacity that are still being ramped up.

The decline in weaving utilisation in FY26 reflects the start of a new weaving unit at Kosamba 3 in April 2025.

4. Financials Overview

Revenue grew 66 % in FY25 before shrinking 11 % in FY26. EBITDA margin recovered to 27 % in FY26, but PAT margin (on total income) slid from 17.78 % to 13.80 % over the three years as depreciation and finance costs swelled. RoNW collapsed from an unsustainable 86 % to 26 % after a large equity infusion in FY26. Net debt, once negative, climbed to ₹175.52 crore, though still modest relative to EBITDA. The headline numbers hide the cash‑flow stress examined in the next section.

Customer Revenue Distribution:
- Top 1 customer: 11.13% of FY26 contract revenue (₹751.27 million)
- Top 5 customers: 45.38% of FY26 contract revenue
- Top 10 customers: 59.52% of FY26 contract revenue

Why Revenue Decreased in FY26 — Exact Cause

Revenue from operations dropped 11.17% to ₹6,920.03 million from ₹7,789.97 million. The decline is entirely from two defence segments:

Aerospace & Defence Fabrics (−42.26%): A "large order received in Fiscal 2025 that was not re-ordered in Fiscal 2026" — specifically, ₹2,045.75 million from this order in FY25 vs ₹286.16 million in FY26.

Aerospace & Defence Solutions (−30.14%): "Partial deferral of contract performance on a large contract due to operational requirements of the customer." A ₹2,371.96 million order was received in FY26 but only 23.61% executed; the rest is expected in FY27.

So the FY26 decline is not a demand problem — the company booked a massive new order in A&D Solutions — but a timing/execution problem that shifts revenue into FY27. However, The IPO Prospectus emphasises there are no long-term contracts, so there is no guarantee of repeat orders.

5. Detailed Financial Analysis

Let's start with the most important thing. When a company says it made a profit, you'd expect it to have that much cash in the bank, right? Not always. And in Kusumgar's case, the gap is huge.

Cash conversion: Why Kusumgar’s profit doesn’t match its bank balance

Over three years, Kusumgar reported a cumulative PAT of ₹294.58 crore, but only ₹74.25 crore of actual operating cash flowed into the business – a 25% conversion rate. In simple terms, for every ₹100 of profit the company booked, just ₹25 turned into real cash.

The main culprit is a working‑capital crunch: trade receivables ballooned from ₹42.24 crore (FY24) to ₹233.28 crore (FY26), even as revenue fell 11% in FY26. The company now waits 123 days to collect from customers, up from 26 days just a year earlier.

Working Capital Problems

Kusumgar’s working‑capital position, money a business needs to keep running day-to-day, deteriorated sharply in FY26. Trade receivables — money customers owe — jumped from ₹56.11 crore to ₹233.28 crore, even though revenue fell 11%. The company now waits 123 days to collect payments, up from 26 days a year earlier. That means for four months, the company is financing its customers while still paying its own bills.

A separate auditor’s finding (CARO, FY25) flagged that ₹65.73 crore of short‑term borrowing was used for long‑term purposes — a sign the company is struggling to bridge the cash gap.

Ballooning Contingent Liabilities

Kusumgar's contingent liabilities, potential future payments that might happen depending on certain events, jumped from ₹5.31 crore to ₹108.97 crore — a 20-fold increase.

The main reason is a new ₹103.88 crore bank guarantee. This guarantee equals 20.7% of the company's net worth. If this guarantee is called (i.e., the customer demands payment), it would severely strain the company's already tight cash position.

ECFPL Acquisition

In December 2024, Kusumgar bought Engineered Coated Fabric Private Limited (ECFPL) from its own promoters (Siddharth and Sapna Kusumgar) for ₹111.85 crore.

Here's the problem: ECFPL's coating factory capacity utilisation has collapsed:
- FY24: 94.28%
- FY25: 53.66%
- FY26: 24.98%

Kusumgar paid ₹111.85 crore to buy a factory from its own promoters, but that factory is now running at only 25% of its capacity.

Growing Related Party Transactions

What are Related-Party Transactions? These are deals between a company and its own directors, promoters, or their other businesses. They're not illegal, but they need to be watched carefully because they might not be at arm's length (fair market price).

Kusumgar's related-party transactions as a percentage of revenue:
- FY24: 1.03%
- FY25: 8.06%
- FY26: 11.29%

That's a big jump. In FY26, ₹78.09 crore of transactions were with related parties, including:
- ₹3.98 crore for yarn purchases from Specialty Fabrics
- ₹2.57 crore for machinery from related parties
- ₹25 crore loan taken from and repaid to Siddharth Kusumgar (promoter), with ₹4.83 lakh interest paid
- ₹5 crore loan taken from and repaid to Sapna Kusumgar (promoter), with ₹1 lakh interest paid

6. Peer Analysis

Kusumgar is the only pure‑play engineered fabrics manufacturer in the peer set — the others are diversified conglomerates.

• Garware Technical Fibres: Application-focused technical-textile solutions across aquaculture, fisheries, sports, geosynthetics, agriculture, industrial, coated fabrics, material handling, defence, and government. Global footprint
• Arvind Limited: Multi-business operator: fabric & apparel, brands & retail, real estate, engineering, environmental solutions, advanced materials, telecom, and garmenting. Textiles is only one division.
• SRF Limited: chemicals conglomerate, diversified across 4 main segments—Fluorochemicals, Specialty Chemicals, Packaging Films, and Technical Textiles

Revenue & Profitability (₹ million, consolidated)

Kusumgar is the smallest among the peers growing faster than the peers but at a slower pace than previous years. It's EBITDA Margin is also best among the peers. But, its revenue is less diversified compared to its peers and while exports have been growing recently, it is still lesser than the peers.

EBITDA Margin (%)

Valuation Snapshot of competitors (as of 19 June 2026, from DRHP)

7. Valuation Analysis

At Floor Price of ₹398, the diluated EPS of ₹9.31 comes out to be 42.7× and at the Cap Price ₹419, the PE is 45.0× .

Kusumgar at 42.7×–45.0×, above the peer average of 38.76× and the peer median of 39.80×. At the cap price, it is above SRF (43.77×), the highest peer P/E sitting at a valuation range of ₹4,178.66 to ₹4,399.14 crores.

8. Risks

• Customer concentration with no contracts: The top five customers account for 45.38 % of revenue, and every order is a one‑off purchase order. A sudden loss of a large customer would slash revenue overnight.
• Working‑capital strain: Receivable days at 123 and a 90‑day working‑capital cycle demand continuous external funding; the CARO flag on short‑term funds used for long‑term purposes confirms the pressure.
• Earnings‑quality red flags: Operating cash flow covers only 25 % of cumulative PAT, and the explosive receivable growth while revenue fell is consistent with channel stuffing.
• Governance concerns: Related‑party transactions have jumped to 11.29 % of revenue, promoter loans were taken and repaid within FY26 generating interest payments, the ECFPL acquisition transferred ₹111.85 crore to promoters just months before the IPO, and the parent's standalone statements are absent — all clouding transparency.
• Contingent liability surge: The new ₹103.88‑crore bank guarantee equals 20.7 % of net worth; if called, it would severely strain the already tight liquidity.
• Geographic manufacturing concentration: All six factories are in Gujarat; a single regional disruption could halt output.
• Low capacity utilisation: Processing utilisation at 49.50% and weaving at 62.51% mean the company is carrying large fixed costs relative to output, weighing on margins until new capacity is filled.
• Lumpy order book: The only disclosed pending order is a single large defence contract; the lack of a diversified order book amplifies revenue uncertainty.

9. Things to consider before Investing

This IPO is a pure promoter sale — the company gets no money from the ₹650-crore offer. The price band of ₹398–₹419 values the company at a P/E of 42.7 to 45 times its FY26 profit, which is above the average of its listed peers and even above the most expensive peer, SRF (43.8 times).

Its profit margins are the best in its peer group. However, there are serious cash-flow concerns: for every ₹100 of profit it reported over three years, only ₹25 actually came in as cash. The company now waits 123 days to collect payments from customers, up from just 26 days a year ago.

On the positive side, the company’s non-defence segments (outdoor fabrics and industrial fabrics) are growing fast, helped by global brands shifting sourcing from China to India. But with no long-term contracts, lumpy defence orders, and a valuation that demands a premium for problems that are not yet fixed, investors should weigh these risks carefully.

10. IPO Snapshot

All financial figures in this note are sourced exclusively from the restated consolidated DRHP disclosures. No investment advice is intended.