Defrail Technologies IPO Analysis: Should You Buy or Skip?

As the auto sector grows and railways modernise, Defrail stands as a rubber hose specialist, catering to OEMs, Indian Railways & defence applications.

Let’s explore this upcoming IPO further:

Defrail Technologies’ share price will be finalised post-allotment, while grey market cues through the Defrail Technologies’ IPO GMP will likely reflect market sentiment closer to listing.

India's rubber industry has established itself as a vital sector, rapidly expanding through institutional support for self-sufficiency and import substitution, with synthetic rubber essential for product properties. Globally, India ranks fourth in consumption after the USA, China, and Japan, with per capita usage at 1.2 kg versus the world average of 3.2 kg, offering significant growth scope

Currently, India is on the track to become 2nd second-largest rubber player globally. Interventions from institutional agencies primarily drive the rapid expansion of rubber product manufacturing and consumption. 

Valued at $7.9B in FY24, the Indian rubber market is expected to grow with 6% CAGR, reaching $11.2B by FY32.

It is worth noting that, currently, Synthetic Rubber constitutes around 30% of India’s total rubber consumption, while the global average stands at 65%, providing further room for growth in the synthetic rubber segment.

Company Origin Story

Incorporated in 2023, in Faridabad, Defrail Technologies builds on decades of expertise from promoter-led sole proprietorships—Vikas Rubber Industries (est. 1980, B2C focus) and Impex Hitech Rubber (est. 2008, B2B)—fully integrated via business transfer agreements on April 1, 2024. 

Operating two plants totalling 7,253 sq. yards, the company manufactures specialised rubber components including hoses/assemblies, profiles/beadings, and moulded parts for automotive, railways, and defence applications, using materials like NBR, EPDM, and CR through extrusion and vulcanisation.

The company excels in customising high-pressure, temperature-resistant products like air brake hoses and EPDM profiles for OEMs and government clients, prioritising rigorous testing and client-specific solutions. 

Let’s understand the company’s product categories:

1. Rubber Hose & Assemblies- Think of them as flexible conduit systems designed to transport fluids, gases, or air under varying pressure and temperature conditions. These products include air brake hose assemblies, radiator hoses, silicone hoses, hydraulic hoses, and long-length hoses, among many others. 

*The majority of revenue (96.81% in FY25) comes from this category only.

2. Rubber Profiles & Beadings- Designed for flexibility and environmental durability, these profiles provide effective sealing and cushioning properties under varied operational conditions. These are basically components used for insulation, vibration damping, and weatherproofing in structural assemblies.

*The topline contribution, however, of this segment was at 2.1% in FY25.

3. Rubber Moulded Parts- These comprise precision-engineered components formed through compression or injection moulding to deliver exact dimensional and functional performance. These include rubber bellows, seals, bushes, gaskets, and other custom-moulded elements.

*The topline contribution of this segment was just at 1.1% in FY25.

 (Segment-Wise Revenue%)

It can be observed that Defrail is heavily concentrated in the automobile sector, consistently contributing around 90% of revenue across FY23–FY25 and Sep 2025. The company has modest diversification into railways (8–13%) and a small defence contribution of around 1%.

What is the Raw Material Used?

For synthetic rubber and related polymers, the main raw materials sourced by the company include: 

• Acrylonitrile Butadiene Rubber (NBR)

• Chloroprene Rubber/Neoprene (CR) 

• Ethylene Propylene Diene Rubber/EPDM 

• Chloro-sulphonated Polyethene (CSM) 

• Chlorinated Polyethene (CPE).
  
  

These are basically petroleum-derived synthetic polymers. While talking specifically about the synthetic rubber prices in India, they are expected to range between ₹184–₹194/kg. Global demand growth, projected at 3.2–5.5% CAGR, led by Asia-Pacific (notably China and India), is expected to keep the market active.  

Defrail operates two manufacturing plants in Faridabad, Haryana, both focused on rubber extrusion, moulding, and assembly.

Plant 1 – Neemka (Tigaon Road, 2,420 sq yards): Legacy facility from Vikas Rubber Industries (est. 1980), main production hub with capacity 2.37mn kg/month (FY25).

Plant 2 – Sector 24 (4,833 sq yards): Newer site from Impex Hitech Rubber (est. 2008), higher automation, capacity 0.99mn kg/month (FY25), utilisation ~42%.

Defrail's capacity data reveals expansion alongside suboptimal utilisation, with Plant 1 scaling installed capacity by 56% in two years. The utilisation, however, is stuck at 30-45% post-acquisition ramp-up. Plant 2's capacity tripled by FY25, yet utilisation fell to 42% from 75% peak, signalling production inefficiencies, demand variability, or line-balancing issues ahead of IPO-funded doubling.

Management + Promoter Holding

Primarily led by the Aggarwal family, promoters of the company include Mr Vivek Aggarwal as Chairman & MD, Mr Abhishek Aggarwal as Director & CFO, Ms Ashi Aggarwal as Non-Executive Director, respectively. 

The promoters have 16+ years of combined experience in rubber manufacturing. The collective leadership and profound industry expertise have driven both innovation and excellence in making products.

While 4 out of 7 board members are independent directors, the governance ensures quality as the audit and remuneration committees are led by independent directors. 

From a control standpoint, the promoters hold a dominant 100% stake pre-issue. Post-IPO, this stake will dilute to 73.52%, but promoter influence will remain firmly intact, given their high base ownership and board control.

Financial Performance 

Topline has given a decent growth at 35% CAGR from FY23 to FY25. While the growth in FY25 has been at a high rate of  106%. The company, however, witnessed negative sales growth for FY24. On annualising the 6MFY26 sales, the growth seems to be slightly muted compared to the previous trend.

Margins didn’t improve much, with EBITDA margin showing a slow growth of 6.3% in FY23 to 8.9% in FY25, with a slight decrease to 8.6% in the 6M FY25. That’s a big shift toward higher-value formulations and better cost control.

Coming to the PAT margins, not much improvement can be observed over the years — from 2.6% (FY23) to 3.9% (6M FY25) — showcasing further scope of improvement. The CFO has been positive and stable,  while the working capital days have been on the negative side over the years, with (2.9) days in FY25.

D/E ratio, despite being high, has shown significant improvement over the years, ranging from 1.5x in FY23 to 0.9x in 6MFY25. This signals lower leverage and improved cash generation.

ROE and ROCE stand at 77% and 25.8%, respectively. The financials witnessed a surge in ROE & ROCE, when compared to FY23, placing Gabion Technologies above the listed peers. The company has also maintained its current ratio well over the years at around 1.

On the basis of peer analysis, it can be said that apart from high return ratios, the financials of Defrail Technologies lie in a similar range as those of its peers. The EBITDA & PAT margins are 8.6% and 3.9%, respectively, which are in the industrial range.

The return ratios of the company are in the industrial range, with ROE & ROCE at 77% & 26%, respectively. These ratios are expected to reduce as the denominator increases on account of a rise in equity.

In terms of valuation, Gabion Technologies India lies in the fair range with a P/E ratio at 17x, while the EV/EBITDA stands at 18.3x.  The borrowings of the company are at a moderate level with a D/E ratio at 0.9.

Overall, in terms of margins and valuation, when compared to peers, it can be said that the company has a moderate level of financials, requiring focused efforts by the management.

IPO Objectives

The company will be using the proceeds for:

• Purchase of equipment & machinery (₹796 lakhs): New extrusion lines, compounding mills, injection moulders, knitting machines, QA lab upgrades at Plant 2 to boost utilisation, pass OEM/Railway/Defence audits.

• Solar panels installation (₹173 lakhs): At manufacturing plants for cost savings/energy efficiency.

• General corporate purposes (up to 15% or ₹100 lakhs): Working capital, debt repayment, contingencies.

Overall, the issue aims to strengthen Defrail’s manufacturing capacity and efficiency, along with improving its financial flexibility. The combination of expansion and deleveraging positions the company for more sustainable future growth.

At Alpha Venture X Fund, we assess opportunities through our LMVT framework — Leadership, Moat, Valuation, and Tailwinds — enabling us to identify scalable businesses with durable fundamentals.

Leadership: Founder-led with strong industrial experience and equity retention, ensuring aligned execution and focus on scaling the refurbishment business.

Moat: Despite having in-house manufacturing, the company lacks a moat since synthetic rubber is a commoditised business. Putting it at risk in terms of expansion.

Tailwinds: Rise in the auto sector & railway expansion, along with low per-capita rubber consumption in India currently, provide demand-side growth to the company.

Valuation: P/E currently at 17x, which is lower than the peers. While the EV/EBITDA ratio is higher than the industrial range. 

Bottom Line: Defrail Technologies has a decent level of revenue growth backed by moderate debt. Synthetic rubber, however, is a commoditised product. The company also faces intense competition from both organised and unorganised players and lacks the necessary moat. The valuation is also not attractive, being in a fair range. Defrail Technologies India is not a buy for investment purposes.