Kusumgar IPO: A Potential Long-Term Growth Opportunity for High-Risk Investors?
Kusumgar, an engineered fabrics manufacturer, is gearing up for its IPO with plans to raise ₹650 crore through an offer for sale. Following the listing, the promoter group’s stake will decrease significantly from 90.1% to 75.4%. The company specializes in creating customized fabric solutions catering to the aerospace and defense sectors, as well as industrial, automotive, and outdoor lifestyle applications. It boasts a solid operating margin, with an EBITDA margin of 27.2% for FY26, which is commendable when compared to the margins of its listed peers, ranging from 10.7% to 22.9%. However, investors should note that approximately 45% of Kusumgar’s revenue is derived from its top five customers, exposing the company to customer concentration risk. Additionally, the company’s reliance on exports positions it as vulnerable to fluctuations in global trade policies and tariffs.
Financially, Kusumgar reported a 21.6% annual increase in revenue to ₹692 crore and a net profit of ₹98.2 crore, an increase of 7.9% from FY24-26. Despite these positive trends, the company experienced a year-on-year decline in both revenue and net profit for FY26 by 11.2% and 12.3%, respectively. A noteworthy point is that the EBITDA margin improved to 27.2% in FY26, boosted by a favorable product mix. Nonetheless, the revenue dip was attributed to deferred project execution alongside higher tariffs imposed by the US, affecting demand. The company’s export segment constituted nearly 40% of FY26 revenue, with 9-10% stemming from the US market. Investors should also consider Kusumgar’s improved operating cash flow, which experienced a significant turnaround, moving from a deficit in FY25 to ₹28 crore in FY26.
In terms of valuation, the IPO appears to be priced at a premium to its peers, reflecting its superior margins and niche market positioning. The post-IPO price-earnings (P/E) multiple stands at 45, compared to a range of 33-46 for competitors like Arvind, Garware Technical Fibres, and SRF. For Indian investors, Kusumgar poses an intriguing proposition, especially for those with a higher risk appetite, as the company’s unique market position and robust profitability may present long-term growth opportunities, despite the accompanying risks of customer concentration and export reliance.
Source: The Economic Times
(Expert Note: This report was prepared by the Wealthova IPO team.)