Kusumgar shares jump 50% on debut amid analyst divide over defense play
Kusumgar's heavily oversubscribed IPO surged 50% on its first trading day, but conflicting analyst views highlight the tension between defense sector optimism and the company's recent financial decline.
Kusumgar made a strong market debut on Wednesday, with its shares quickly hitting the 10% upper circuit on both Indian exchanges. The stock listed at ₹574 on the BSE and ₹569 on the NSE, a premium of roughly 37% to the ₹419 issue price, before surging further to ₹631.35 on the BSE. By late morning, the shares were trading at ₹612.35 on the BSE, up 46% from the offer price.
The sharp initial rally was largely pre-priced, matching the ₹161 grey market premium observed ahead of the listing. It also reflected massive demand during the subscription period, where the ₹650.34 crore offering was booked 128.85 times. However, market participants are absorbing a critical structural detail: the entire offering was a 100% offer for sale, meaning Kusumgar received no fresh capital to fund expansion.
This lack of new capital, paired with recent financial underperformance, has prompted caution from some market watchers. “While the company operates in a niche engineered fabrics business with strong entry barriers and long-term opportunities in aerospace and defence, investors should also note that its financial performance has weakened over the last three years, with declines in revenue, EPS and RoNW,” said Shivani Nyati, Head of Wealth at Swastika Investmart Ltd.
Nyati noted that FY25 earnings were largely supported by a one-time CFF parachute order. She advised existing allottees to book partial profits while holding the remainder with a strict stop-loss at ₹520. For fresh investors, she recommended avoiding the stock at current levels and waiting for better entry points after earnings visibility improves.
Conversely, Emkay Global Financial Services initiated coverage with a 'Buy' rating and a target price of ₹800. The brokerage is betting on the company's positioning within aerospace and defence fabrics, a segment bolstered by rising global defense budgets and favorable trade agreements. Emkay projects a revenue, EBITDA, and PAT compound annual growth rate of 34%, 35%, and 46%, respectively, between FY26 and FY29.
This bullish forecast hinges on a recovery in contracted defense orders from FY27. Emkay values the stock at 40 times its estimated June 2028 earnings, a premium multiple that assumes Kusumgar can successfully transition from a company reliant on isolated orders into a diversified, high-margin defense supplier.
