0:00 Hey. Hi everyone. Welcome to Primary Market Chatter brought by Sunday. This is our July 1st week IPOS edition. If you can hear me, please just uh message that you can hear me. >> That may Can you say something because I can only see you as a listener. You're saying that you are in but can you try to say something? >> Can you hear me? >> Yeah, I can hear you. Perfect. >> What happened? >> Perfect. Perfect. Yeah. With that uh we are back with another episode. This one is a very quick episode because we'll only be covering two companies. There are just two companies that we have to cover. Before we actually get started, just want to highlight that we are not SEB registered. None of what we say is qualified opinion. Please do not take as one. We just like to discuss IPOs on
0:46 what we feel with respect to fundamentals of the company etc. and uh that may play out that may not play out. Please do your due diligence and apply basis that only apply or not apply basis that please do not uh do anything basis our recommendation this is just a show to help you with what we feel are uh opinion is second if you haven't followed our YouTube channel please go ahead and follow it uh the link is in the pinned comments there I uh put in the YouTube channel as well please go ahead and uh support it uh that's where we kind of talk about all the companies and put whatever shows that we have we put them there and then we also interview promoters etc when they're coming coming
1:32 for IPO uh we have done like some 41 of them that's they are also on our channel and then we also have started a new series called capital conversations where we had spoken with Prabhakar Mr. Prabhakar Kudwa and then we have a new guest as well um which will probably we'll make live over the next 15 days uh but we'll be talking to Mr. Deepak Shinoi. Um so very excited about that as well. But yeah, that is with respect to the channel. Please go ahead and subscribe. Uh with that uh let me set up the agenda for the day. We'll be talking about two companies. Uh one is Kosunga Limited and then second is I IC electrical. So those are the two companies for the day. Uh so probably we'll start with Kosum uh and then cover
2:19 uh IC because Ro has to do IC. Ro will join by like 8:30 is what he has told me. So he'll probably start with Kosungar and then come to IC. Uh setting up Kosungar very quickly uh in corporate in 1990. The company is a manufacturer of buban coated and laminated synthetic fabrics known as engineered fabrics which are in a wide range of uh industries including aerospace and defense, industrial, automotive and outdoor and lifestyle segments. So it's a technical textile company most of which is used in uh defense and aerospace. So that is where it becomes odd. We'll kind of understand the company in terms of the IPO. It's a 650 cr IPO all of which is OFS companyly exit like partly exit 650 promoters
3:06 IPO 4400 valuation so it's a 650 cr at 4400 so 15% dilution FI 26 financials to 711 crores top line and 98 crores bottom so good healthy 1450 15% margin company 4526 so at least high level for FI26 we'll try and understand growth terms of the LM the LM is excess and motil so to talk about Kusumar am I audible >> hello >> yes >> yes yes >> so Kusungar limited is a leading
3:53 manufacturer of uh specialized engineered fabrics and technical textiles serving high performance applications like aerospace and defense uh industrial and automotive. It is also a supplier of engineered fabrics to Decathlon for ature wear. [snorts] The company manufacturer manufactures high performance fabrics using polyomide polyester filaments along with polyurethane uh chemistry. Its products are designed to provide strength, durability, abrasion, uh resistance, comfort, air permeability and waterproofing. [snorts] Uh so the company has got about thousands unique SKUs. Uh 60% of its revenues are derived uh from the domestic Indian markets and rest 40%
4:38 comes from the exports. Uh so basically you know all put it in this way. I'll just divide the company into four segments which are its you know revenue segments and I'll explain each one of them in depth. So you know uh it would be easy for the viewers and listeners to understand what exactly the company does. So they have got four segments. First is aerospace and defense fabrics uh from which they derive 32% revenue. Here they manufacture and supply parachute fabrics uh which are used in cargo cargo parachutes, drop parachutes, tact tactical assault parachutes. Uh also they uh they are used in defense gears, tactical clothing uh and uh you know high altitude parachutes, recovery
5:25 parachutes, space module recovery and all these things. the 23% revenues come from a aerospace and defense solutions. So what they exactly have done in this category is in the first category they were supplying fabrics uh for supporting the manufacturer manufacturing of all this sort of parachutes. The second segment they are uh doing an end to-end solution in which they themselves supply those uh uh end to-end uh solutions in which they have got uh you know stuffs like aerial systems, stealth systems, tactical assault parachutes, rapid deployment systems, recovery parachutes. So it is an complete end to-end solution. Uh so they uh take the order complete and then supply uh as per the
6:11 requirements. Uh they have the third the third segment called as industrial and automotive fabrics in which uh you know their fabrics are used to manufacture convertible tops and roofs. Uh you know interiors of your automotive vehicles uh railway uh medical equipments. Uh there is something called as reinforcement fabrics. Then inflate uh inflatable rescue boards. Uh aircraft evacuation slides uh air holdings structures etc. The fourth segment what they do is called as outdoor and lifestyle fabrics which contributes to about 19% of its revenue in which they've got segments like athleisure wear, rainear, winter wear, jackets, uh backpacks and sleeping bags. So they here they primarily manufacture for
6:57 decathlon uh you know and also for some other vendors whose name hasn't been disclosed. The company is a pioneer in parachute fabrics among ma uh among major companies outside US and China in military uh speciality military fab uh parachute fabrics. The company is raising about 650 crores out of which you know full of it is in full offer for sale and whole 650 cr is being raised uh you know in an offer offer for sale for the promoter. So there is no investor who is seeking an exit. Coming on its financials, FY24 the company delivered a revenue of 468 crores uh and an aid of about 13 132 crores which is about a 28%
7:42 uh margins 84 cr uh is what their PAT is uh FI25 they did about 779 cr topline 188 cr bida and 112 crores k so their bida margin dropped from about 28% to about 24% % uh in FIR25 in F26 the revenue fell by 11% to 692 crores 188 cr was the bida so iida number has been the same between f2 and 26 but just the revenue has fell by 11%. And the pat also felt decently about about 15% to 98.2 2 crores. Now the biggest question here lies is why did the revenues fell in FI26.
8:27 So this was asked to the management and they had commented upon key you know that two major contracts out of which one was expected from Indian navy or defense if I'm not wrong which got delayed to uh Q2 of FI27 and also they had a major US maritime order which also got delayed due to the uh Trump tariffs and in Q1 that has been already delivered so that revenue has been shifted uh so that has led to a drop. So FI27 numbers to what I have done is I've estimated you know about a 20% topline growth uh because the defense fabrics in India are growing at about 18 19% C. So I've considered
9:12 20% as a whole and also added upon those shifted orders whose number has been disclosed but I have just got some figures from somewhere and these are my internal calculations. So these guys should do about 1,50 cr to 1100 cr kind of a top line in F27 which should be an insane growth about 50% odd and I bid off around 300 crores and a pat of about 170 to 180 crores is what their F27 estimates suggest. Uh the uh the company is coming at about 4,400 cr market cap uh which values the company at 44.8 times F26P and about 22 23 times EIDA. uh the company has also done an preipo in September 2025 uh where they had diluted about 10%
9:59 equity at 3,800 cr valuation. So the IPO is coming at about 14.9 to 15% premium toward the preipo round was done. The preIPO round saw participation from investors like Motil, Edelwise, Park Madas Family Office, Vito Capital, Ashoka India Equity, Franjipani Capital, Noama, AR Investments, LCID Investments, PM Family Office, Trevali Electronics and STDA family office and another two three individual names. So now coming on their uh you know positives and negatives. So the biggest positive is uh that the segment is going through a lot of structural tailwinds in which there is a push of making in India uh where government wants all these different fabrics and related technical textiles to be manufactured in house. Uh and so
10:46 so this is basically not a less of an expansion of the market but sort of a shift from your uh you know chi uh you know uh Chinese and American vendors to you know pure plain Indian vendors. uh the second thing is the the segment of defense fabrics defense and aerospace fabrics is growing at about 19% CG till FA 29 if I'm correct. So 19% growth at an industry segment level for next four financial years is is uh you know quite good. Uh another thing is uh there are lot of entry barriers. There is no there are less very very few players in this segment uh you know which operate uh you know for in this se sectors and all this product portfolio. It is very uh tough
11:34 to get qualifications for all these things and also uh you know making relationships. One good thing which I saw is even though they're supplying to defense many of their exports are deemed exports and not necessarily it has to go through uh the government as such. So their uh working capital cycle is fairly less stretched than the other uh pure play defense and aerospace companies. Obviously this is not a pure play defense company as such and a a direct beneficiary or a an adjacent company or segment to it but still the working capital matters as at as you know it also reflects in your cash flows and also the working capital cycle. Uh another good thing is they've already did did a 2 and 1/2x capix uh last year which which has got operational already.
12:21 So uh their uh capacity utilization you know stands at about 50% for the processing thing which which includes dying finishing you know printing and coating and about 62% utilization on their weaving and laminating end. So uh the company can easily double their revenues I'm saying in terms of production and volume growth. So FI27 shouldn't see a lot of utilization coming. It should be around 75 to 80% because you know so that should just get added up. So the still F28 will also have sufficient capacity with them but for sure they would be needing another capacity coming up maybe for FI29 growth. uh uh the another thing was uh you know the promoter quality when I was
13:07 I was listening to one of the promoters the main uh you know the person who had founded the company which was about 5 six years back interview so still there is insane level of clarity very high promoter pedigree and you know um you know he sounds too good you know even the recent interviews were quite good I'm not saying the IPO interviews but just before the IPO there were few interviews which was which were done I would say coming on the negatives uh First negative I feel is the time is very limited. I don't feel this is such a huge segment which can go if insane 5 10,000 odd cr segment. Yes there might be that much time but there are other uh you know overseas players there. So uh I don't feel the time is such huge which can take this company to some insane scale. There is a there's a limit to their revenues.
13:53 The second is I feel the uh you know the the typical defense and aerospace thing which is yours working capital stretchment. So it it is lesser than the other pure play defense companies but still not that that small you know the cash flows aren't that great which I was expecting by looking at the you know know other things. Uh that's it as such negative uh the debt is almost know very less uh there's no no issues on that and the return ratios are quite good. Uh now coming on how to value this company and what do I do do I feel about the company? So uh if I just look at uh you know uh the valuation part it is coming at about a 13 times 13 to 15 times fi27 e bida and
14:40 uh around 25 times or p fi27. So I feel what what is going to happen is everyone knows that the H1 Q1 Q2 of FI27 is going to be tremendously good for this company because uh the the US maritime order shifted to Q1 and that government large order shifted to the Q2 or the partial Q2 but I feel that should be in Q2 itself. So markets should already discount that crazy [clears throat] number in the H1 which should take the stock to some insane multiple for I feel short to medium-term. So I feel uh this can be easily valued at you know around a 25 times EV bit and like around 35 to 40p on FI27 for the medium-term which should which would you know see an upset about 50 to 60% in
15:25 this company but like what I personally feel is this will list at an insane number anywhere around 30 40% it should get listed easily uh it should even see some upside even from that number but uh when that those numbers of H1 crazy numbers of H1 come or the growth is going going back to that number of 15 20% or because it would be at that around uh you know $130 million which is quite a decent base to have that growth will be around 50 20% and it cannot be going beyond that what I personally feel max it can go is 20 to 25%. And end of the day it is a very high-end technical textile company. So it has got some cap on the valuation. So what I feel is it can be definitely
16:11 applied for listing gains as well as for short-term. But [snorts] I would be uh not very comfortable holding this company for long-term in case I get an allotment. So I feel it is an apply for listing as well as for shortterm or even 6 months horizon but not more than that. I feel once the Q1 numbers and Q2 numbers are out this stock should be flat for a very long time or even see uh know the stock going down because uh the 10% equity of the preIP will also get unlocked and also the IPO will also see some you know anchor book openings and all that stuff should happen and also there was some small 2% preipo which was done about 2 three days back I'm yet to see who are the names but that I'm I'm expecting there should be some family offices or mutual funds coming in so the promoter holding thing was about 76 77%
16:58 which has now came below 75%. So there is no hanging sort of any further promoter selling coming up on that MPS rule thing. quite positive in the company. Uh very good company, good capabilities, uh good segment, solid promoters, quite unique of a company. FY27 should be great. Valuations are good. I wouldn't say they're expensive. Neither not also very very cheap, you know, decent reasonable valuation should do well, but not very positive on the longer term. If the stock was 50 to 60% above issue price in in short term >> got it thanks question basic how big is the tan market because like when I was
17:46 reading about the company I thought that the market is rather limited right and most of the like tailwinds are because of Indianization in order so they are able to grow very very fast right but how big is the inherent market for some of the parachute clothing etc that they do according to you. >> So so there are you know I would say segments to it. First is your current even I had mentioned it earlier key the time is pretty limited. uh but I there are no specific FNS or some rates report to it but I was reading somewhere that a specialized you know aerospace and defense uh you know engineered fabrics globally market is around 40,000 crores is what I was reading specialized technical fabrics uh and I and I feel a large contributor I would say more than
18:32 50 60% of that market is with US and China you know and and partially with Russia Russia is another above that 50 60% market so I feel that is a limited number and I don't see Indian market being anywhere about 2,000 or 3,000 odds. I'll get the exact numbers but numbers but that should be around that numbers. Now coming on the time part yes aerospace and defense fabrics as a as a thing is limited but as they're going into full solutions they can take that bigger pie out of it and increase the time but I feel the larger time lies isn't that uh auto industrial and ature where we are seeing decathlon going at some insane numbers on a larger base and going forward also they've got lot of
19:17 plans coming up the uh industrial and automotive markets is also growing and such such companies are very rare to find. So I feel that segment both combined are currently about 40 40% sort of a revenues 40 45% revenue which can go till 60% in maybe a 2 years down the line. So that segment has got lot of time coming up but huh aerospace and defense solutions and fabrics I feel there is a limited time to it and I fully agree upon that point. >> Got it. But P more majorly is because of the defense and aerospace. >> Correct. No, even that segment for them is growing. So if you just look at the revenue split now FI25 may the uh you know aerospace and defense had a larger
20:03 wallet share and FI26 actually that has came down just because of the order shifting but also there's a second question to it aerospace and defense solutions or fabric because we are assuming and all that industrial car you know interior things should have a lesser margin but obviously the margins are actually comparatively higher than aerospace and defense as per the company's book. So that is where the question lies what are the sustainable margins going forward but yes that product m should should change going toward more going towards that industrial automotive and atware segment in next two years. Got it. Understood. I also feel that this is a good company probably priced
20:51 price is in quite a bit of goodness but at least in shortterm there should be enough because the numbers would be good so I'll be applying war and allotment a very small issue right 650 cror book expectation from what I understand anchor book should be pretty good there should be quite a few good names especially for a 650 cr issue >> yeah given the size of the angular rifle. That should be the finest lead. One of the finest. >> Got it. >> Okay. Um understood. That is with respect to Kushungar. With that we'll move forward and talk about
21:37 the second company. Second company we'll cover is IC electrical uh setting up IC uh incorporated in uh 2005 companies engaged in manufacturing of electronic equipments for railway applications and in providing engineering solutions to Indian railways. So railway kati company mix of EPC and own manufacturing we try and understand in terms of the IPO it's a 48 cr IPO uh all of which is a fresh issue market cap 181 crores per company so 27% dization FI26 financials the revenue 144 crores and pad 14 cr so it's coming like 13 14 times FI 26 uh LM LM is next uh so
22:24 that is with respect to uh IC electrical but yeah over to you may rohit to talk about IC electrical thanks man so I think as you mentioned they are they've been a fairly established company now it's around a 20-y old company in the railway uh engineering space uh they focus on manufacturing electrical and electronic equipment for the railway so they do they have two things they have uh some manufacturing business which is about uh 60% of what they do and 40% of what they do is uh just EPC uh so unlike I would say most of the other listed railway companies in the theme space at least you have uh some combination of work so they're not just one type of work they have like even within manufacturing they
23:11 have two distinct segments they do electronics uh which is one segment of theirs they do machines which is stuff like traction motors and stuff and then they also do electrification and EPC. Uh and the good thing is that their business mix is shifting towards more high margin stuff. uh the electronics part of their business is now I think 30% which was 78% uh 2 3 years ago and that is the highest margin highest gross margin high AIDA segment while EPC is the lowest
23:57 only me I cannot hear anything. >> You can hear me? >> I guess not. >> Yeah, I can. >> Oh, okay. I think when the screen Okay. Sorry. Uh, so yeah. So, some of the products that they make are battery chargers, alternators, traction motors. So, these are maybe slightly higher complexity items. Uh, like battery chargers probably more of an assembly item. Alternators, traction motors. There are a lot of players who make this in the undersed space. Uh, but these are still I'd say slightly higher complexity things that they make. They also make smaller parts which are say low comp like some emergency light, some control devices, some vig vigilance control device and stuff which are not that complex but altogether they make uh about I think 30 40 different things. Uh their customers the primary customer is the railways uh that might be either directly to by selling to the railways
24:43 or by selling to some of these uh uh companies like BHL Seammens and all who then ultimately sell it on to the railways only. uh now this business is in a decent uh segment today. The uh railway capex generally you know people feel that there's at least another 10 15 years of uh runway in the railway space with you know the electrification theme with things like wandat and so on uh the metro and the the sort of push towards metros uh a lot of things happening on the safety side. So so there are a lot of different tailwinds within the uh you know within the railway itself. So the segment they are in is good. Plus I think as most people who have studied the segment will know that there are fairly painful approvals here. The RDSO approvals all the railway testing like that takes time. So so that way what
25:29 these guys have done and where they have gotten to is a fairly you know like defensible sort of place. Uh you know once you've approved you kind of stay in the ecosystem. Uh I think also as I mentioned that shift towards electronics, railway electronics is good because it's clearly visible in their margins and they have made it clear I think in some of the preipo interviews that they want to shift firstly more towards electronics and they also want to bring down that EPC component from that 40% to about 30% in the medium to long term. Uh this company has done how much was it about 150 cr 140 sorry 143 cr in revenue last year. It's grown steadily not nothing like you know so uh breakthrough kind of growth 100 became 122 became 143 despite them actually having raised uh some preipo funds uh
26:15 but their margins have you know increased quite a bit as they've shifted from low value ad work to higher value ad work and more on the man manufacturing side so you can see that their pat margin is almost 10% uh so I think about 14 cr pat which is uh good and the trajectory is fairly encouraging on the margin side 180 CR uh order book which is okay. Uh but I think this year they are planning to you know ramp up the order inflows. So we we'll see how that uh how that goes. Uh there are some other products also uh you know for example they do I think DC traction motors today. They have I think submitted AC traction motors for approval which I think has a slightly larger uh opportunity size also. Uh so that if it gets approved can be a good uh tailwind for them. uh the biggest problem so two three things that
27:02 are are challenges with this company uh and you know can say with the space also but definitely with this company I think the first one is their whole cash flow and the receivable cycle is very poor uh I think they have about 110 odd days of receivables this excludes unbuild revenue which is revenue where they have actually delivered the project and they've not even build it as revenue so if you add that I think it is almost like 6 months of receivables plus unbuild revenue which is quite high uh even if you say that the government is a pay master that will delay but not default. It's still a very you know stretched working capital cycle. Uh they also have very very high inventory. So if you see their overall working capital cycle is extremely heavy. uh I think there are some litigations also though those litigations as per the uh promoter
27:50 in one of the interviews he said that these litigations have all have there's it's it's a certain type of litigation which has so far in the past always been decided in their favor uh but you know you have to just keep that in mind I think some 8 9 cr of litigations are also there uh this funnily enough this company also came I think 10 15 days ago Uh initially this was supposed to come as a main board. Then this came as an then this got pulled out. They it looked like the issue was getting cancelled. A lot of rumors were circulating. Then again this thing came back. There was a time when the people who had purchased this in um the preipo guys uh they were selling it you know in the unlisted
28:36 market at the same price that the IPO is coming at. Uh then the anchor book came and the anchor book had uh Bengal finance which is Ashish Kachya's fund. It had Sage One which is a very very high quality fund that's now started coming inmemes and suddenly all of that went away and then you know you can see that there's a lot of uh interest in the gray market as well. This company is coming at a fairly low multiple. I think it's coming at 13 times. If you look at the pure play railway APC there are two three of them. there's a dhara rail and there's some other ones that are associated with uh just railway EPC they don't trade at more than 13 14 15p uh but a manufacturing business generally with all of these approvals and all that is a more defensible business so if you
29:21 can keep aside the working capital problems with this business the fact that he makes fairly comp reasonably complex products you cannot compare this with a h rectifier which is what they have put in the in the RHP I think the Hind rectifier also shows a very high P because of an acquisition that they did which was a lossm acquisition but even if you keep that aside you can't compare with that but directionally the H rectifier makes the entire system while these guys make some of the individual components that go into that particular system uh so it it maybe one day you know if he's able to uh increase his product range and and get better and better he says he spends 5% of his revenue on R&D like if that is some of that is true then you never know right over time if there's a a rerating also
30:06 that is possible at the asking price it is fairly cheap I don't know you know what to make of the whole delay and some of the rumors and you know there wasn't a very good vibe of this company until the anchor book came out and then suddenly things changed so like it's I I feel this is okay definitely for listing gain because it's coming at very very low multiple even if you tack on a a manufacturing multiple to 60% of your business, you'll definitely get some upside from here. Uh but if you're doing if you intend to hold this for the long term, I think do a little bit of digging into what challenges you know people have with this company who have invested in this company in like preipo and stuff and just understand if those are real or those are assumed because very high
30:52 quality investors have come in in anchor and they would have also done diligence. I know for a fact that Sage 1's diligence is uh they are very very deep diligence investors. They don't just invest in anything. Um so it it like that really helped calm I think a lot of people but if you are looking to do this keep this for the long term just do a little bit of your own diligence on that. That's not something we have been able to do. So I don't have any any more to add on that front. Just simply laying out the various noises that are there in the market. Uh overall it looks like an easy apply. I think very very cheap at 134p. I personally as of now with what I know I don't think I will keep this for longterm if I do get a lotment or I'll make an effort to try and understand what some of those issues were if I do
31:38 intend to look at this company for the long term. Got it. Yeah, that's all of us. All of us are looking for a lotment to flip this one. But yeah uh the anchor book is good. It's priced in well uh nothing to lose at this price per se and then long-term we'll have to understand the company etc. So we'll apply uh and see how the manufacturing etc story plays if we hopefully get some allotment although a lotment will be very difficult in this one right because it's not clashing with anything like you can use your money for uh kosunga or next week IPOs as well. So it's literally tying your lap. So I think this will subscription this will
32:25 shoot the roof say. So but yeah uh that is with respect to IC electrical. So we have covered two companies today. IC electrical and kusung if you have uh that with that we'll kind of end today's page. I'm just seeing if there are any questions which we can take or we can just wrap up the space. Perfect. Thank you so much everyone for joining. Have a great day. >> Thank you. >> Bye.
