Can Kusumgar IPO deliver long-term growth for high-risk investors?

ET Intelligence Group: Engineered clothing maker Kusumgar plans to raise ₹650 crore through offer for sale. After the listing, the promoter group’s stake will reduce from 90.1% to 75.4%. The company develops customized fabric solutions for aerospace and defense, industrial, automotive and outdoor lifestyle applications. The company benefits from strong profitability, with operating margin (EBITDA margin) before depreciation and amortization at 27.2% in FY2026, compared to 10.7-22.9% for listed peers. However, about 45% of revenues are derived from the top five customers, highlighting customer concentration risk. The increased export risk also makes it vulnerable to changes in global trade policies and tariffs. Additionally, it appears that the IPO is priced higher than competitors, reflecting better margins and niche positioning. Given these factors, investors with high risk appetite can consider the issue for the long term.

Business

Established in 1990, Kusumgar manufactures woven, coated and laminated synthetic fabrics, commonly known as engineered fabrics, from six manufacturing facilities in Gujarat. The company supplies specialty fabrics used in parachutes, tactical gear and camouflage systems, mechanical rubber accessories, inflatable products, activewear, rainwear, backpacks and luggage. The top 10 customers accounted for nearly 60% of FY26 revenues.

financial position
Revenue grew 21.6% year-on-year to ₹692 crore while net profit grew 7.9% to ₹98.2 crore between FY24-26. EBITDA margin declined to 27.2% in FY26 from 28.2% in FY24. On a year-on-year basis, revenue and net profit declined by 11.2% and 12.3% respectively in FY26. EBITDA margin expanded to 27.2% from 24.2% in FY20, aided by favorable product mix.
The decline in revenues was primarily due to delayed execution and higher US tariffs as well as non-recurrence of defense orders, which adversely impacted demand from the US market. Exports accounted for around 40% of FY26 revenues, with the US contributing around 9-10% of sales. Operating cash flow improved significantly to ₹28 crore in FY26 from a loss of ₹155 crore in FY25, although it remained below the ₹201 crore generated in FY24. Return on equity (ROE) declined to 25.8% from 86.1% in FY2026, but remained higher than peers by 10-14%.

Evaluation
Considering post-IPO equity, the price-earnings (P/E) multiple is 45, while it is 33-46 for peers including Arvind, Garware Technical Fibers and SRF.