KUSUMGAR LIMITED

Kusumgar buys nylon and polyester yarn and turns it into fabric built to a performance specification, doing the weaving, dyeing, printing, finishing, coating and lamination in house. The output goes into parachute canopies, ballistic and tactical clothing, camouflage nets, cargo drop systems, inflatable decoys, wire harness tape for cars, and fabric for luggage and outdoor apparel.

The company was set up in 1970 and has supplied parachute fabric to an Indian government customer since 1976. It has developed more than 1,000 fabric configurations, from 15 denier yarn at the fine end to 1,000 denier at the heavy end, across nylon, polyester and aramid. It runs six plants in Gujarat and one stitching unit in Uttar Pradesh. Exports are 40% of revenue, with Germany the largest export market at 11% and the US at 9%.

It is the only listed company in India built purely around this. Others carry a technical textile division inside a larger group. It is also one of the few makers of military parachute fabric anywhere outside the US and China, and the fabric and parachute systems partner for the Gaganyaan programme.

Four engines drive the revenue. Revenue from contracts, in ₹ cr:

Shares outstanding are 10.499 cr. The IPO was entirely an offer for sale, so the count is identical before and after and the company received none of the 650 cr.

Two things explain a 62% gross margin.

Approval takes between two and ten years from first sample to first order. The markets are also small in absolute terms, which reads like a limitation but works the other way. A market this size cannot repay the cost of entering it, so nobody spends five years and a few hundred crore qualifying into it. Supply cannot respond quickly to demand and the incumbent holds the price. On top of that the fabric is a small share of the customer's cost and a large share of the customer's risk. A parachute that tears kills someone, so having qualified a supplier a customer has little reason to re-tender to save a few percent and little ability to do it quickly.

The evidence that this is pricing power rather than a story is what the P&L did between FY24 and FY26 while the business underneath it changed completely.

The single product that was 47% of FY24 revenue stopped selling entirely. The customer behind it fell from 47% of revenue to 11%. The mix moved out of defence fabric and into backpack and auto tape fabric. Gross margin moved 50 basis points. If a customer were setting the price, the price would have moved when the customer changed.

FY26 makes the same point on its own. Revenue fell 11% and EBITDA margin still rose 290 basis points, from 24.2% to 27.1%. The company also states in its offer document that it has passed raw material cost increases on to customers, which a price taker cannot do.

FY25 is the exception in the table and the reason is mix, not price. A&D Solutions went from 1 cr to 222 cr in that year. Solutions is assembled kit, not fabric, so a large part of its revenue is bought-in content sold on. That drags gross margin down without touching what the company charges for its own product, which is why margin snapped back to 61.7% in FY26 once Solutions fell away.

The plant is half empty, and that happened by accident rather than design. Karanj processing and Karanj coating commenced in FY25 and Kosamba Weaving 3 in April 2025, roughly tripling processing capacity from 46.9 mn metres to 127.8 mn metres. The orders meant to run through it slipped. Utilisation collapsed from 94.3% to 42.3% and recovered only to 49.5% in FY26.

About 330 cr of capex went into that build and it is finished. Maintenance from here is guided at roughly 50 cr a year.

So the size of the opportunity is set by what the existing plant can produce. FY26 turned 63.3 mn metres of production into 692 cr of revenue. Running the same plant at its full disclosed capacity, at the same revenue per metre, gives about 1,400 cr of revenue (692 divided by 49.5%). Weaving would need topping up with bought-in greige fabric and job work, which the company already does today.

That is the ceiling on the current asset. This is what the P&L looks like at it, using the FY26 cost structure with a small allowance for gross margin normalising and for fixed costs rising:

The margin expands by six points without the company doing anything clever, because most of the cost below gross profit is fixed. That is why growth from here would need almost no fresh capital, and it is the reason to look at this now rather than in two years.

There is also evidence that contracted work already exists. A bank guarantee of 103.9 cr sits on the FY26 balance sheet, disclosed as being for government contracts, against nil in both FY24 and FY25. These are performance guarantees, posted by a supplier to a customer as security against work it has committed to deliver. Banks do not issue them without a signed contract, and a company does not pay for 103.9 cr of them against work it does not intend to execute. That is contracted revenue that has not yet been recognised.

Q1FY27 results, the first quarterly disclosure since listing. Two numbers decide the year: revenue, which shows whether the guaranteed work has started converting, and receivables, which shows whether FY26 was a sale or a shipment.

The 233 cr receivable collecting. 64 cr of parachute systems and 51 cr of a service contract were recognised in Q4FY26 alone and moved straight into receivables. If that cash lands in H1FY27 the working capital cycle drops back and the FY26 optics resolve themselves.

Utilisation crossing 70%. The margin expansion above is mechanical once the plant fills. It shows up in the EBITDA margin within two quarters of the volume arriving.

The new lines ramping. Karanj processing ran at 59.1% and Kosamba Weaving 3 at 59.4% in their first full year. Both have headroom before any capex is needed.

Industrials and Outdoor. Industrials grew 46% and Outdoor 119% in FY26 while defence fell. They sell to fragmented commercial buyers rather than to one government, and they carry the same gross margin. This is the part of the business nobody is underwriting.

Orders, not price, are the variable. There are no long-term supply agreements with customers. FY26 is the evidence: revenue fell 11% while the price held. The company sets its price but cannot make anyone buy.

Revenue arrives in programmes. One product was 47% of FY24 revenue and is now nil. Another went from 1 cr to 222 cr and back to 155 cr. The franchise absorbs this, the yearly number does not. Government revenue was 3.3% of sales in FY24, 34.7% in FY25 and 15.1% in FY26.

Growth consumes cash. The working capital cycle went from minus 10 days to 90 days and receivables sit at 123 days. In FY24 the customer funded the order through a 126.5 cr advance. In FY26 the company funds the work itself and posts a guarantee on top.

No capital came into the company. The full 650 cr went to the selling promoters.

The float is thin. 24.3% free float, with anchor lock-in releases on 12 August and 11 October 2026.

Inputs are imported. Yarn, chemicals and machinery are all bought in, and input cost is linked to crude.

At ₹589 the market cap is 6,164 cr and enterprise value about 6,413 cr. That is 63x FY26 earnings and 34x FY26 EBITDA.

Fill the plant to the 1,400 cr described above and the cost structure gives roughly 460 cr of EBITDA, and after depreciation, interest, other income and tax, somewhere near 290 cr of profit. Against today's market cap that is about 21x a fully loaded plant. That is what the price is capitalising.

Getting there needs revenue to compound at about 26% a year for three years from a base that just fell 11%.

That is achievable. The capacity is built and paid for, FY25 already did 779 cr, and 103.9 cr of performance guarantees say contracted work is in hand. Capacity is not the constraint. Timing is, because it needs orders to arrive across three consecutive years rather than in one lump, which is not how they have arrived so far.

Two things the price does not leave room for. The plant filling while the multiple stays where it is, and any revenue beyond roughly 1,400 cr, which needs fresh capex and restarts the capital cycle that makes the margin arithmetic work.

Negative

Positive

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