Kitex Garments Ltd Management Discussions

Economic review

Global economy1

The global economy exhibited notable resilience, growing by 3.3% in CY2024 despite enduring headwinds, such as geopolitical instability, realignments in global trade and tighter fiscal conditions. The US economy expanded by 2.8% in CY2024, fuelled by robust consumer spending, sustained labour market strength and real income growth. The European economy continued to navigate the dual challenges of tight monetary conditions and lingering geopolitical uncertainties. The economic momentum in China was supported by trade tailwinds and public spending. Despite this, the economy faced challenges in its property sector. Advanced economies posted a modest growth of 1.8%, while Emerging Markets and Developing Economies (EMDEs) remained the principal drivers of expansion, achieving a growth rate of 4.3%. One of the crucial developments of the year was the broad-based moderation in global headline inflation, which eased from 6.6% in CY2023 to 5.7% in CY2024. However, the pace of disinflation varied across regions- advanced economies showed steady progress towards inflation targets, while emerging markets continued to grapple with inflationary pressures due to currency fluctuations and supply chain inefficiencies.

Amid persistent geopolitical tensions, including the Russia–Ukraine war and conflict in the Middle East, global trade began to exhibit signs of recovery. This was supported by resilient consumption trends, public investments and coordinated policy action in major economies. However, merchandise trade growth remained inconsistent, hampered by shifting tariff structures, restrictive trade measures and climate-related events that disrupted global logistics and trade corridors.

GDP growth projections in CY (%)

Outlook

Global growth prospects for the near-term remains cautiously optimistic. The International Monetary Fund (IMF) projects global GDP growth at 3.0% in CY2025 and 3.1% in CY2026. This outlook is supported by sustained consumer demand and the gradual easing of monetary policies as inflation continues to moderate. Headline inflation is expected to decline further to 4.3% in CY2025. Central banks are expected to recalibrate their stance towards more accommodative monetary conditions, aiding global liquidity and investment flows.

Going forward, global trade dynamics are anticipated to remain sensitive to policy decisions, especially with impending tariff revisions and realignments by major economies. In this context, businesses across sectors are expected to strengthen regional partnerships, diversify sourcing channels and invest in supply chain resilience to mitigate emerging risks. Emerging markets, driven by rising consumption and expanding manufacturing ecosystems are set to contribute substantially towards shaping global economic momentum. The interplay of macroeconomic adaptability, digital transformation and sustainability alignment will define the next chapter of global growth and competitiveness.

Indian economy

The economy of India continued to outperform its global peers, registering a real GDP growth of 6.5% in FY2024-25, as per the Second Advance Estimates from the Ministry of Statistics and Programme Implementation (MoSPI).2 This momentum reflects sustained economic resilience amid global uncertainties, including geopolitical tensions in Europe and the Middle East, as well as volatility in commodity markets. The year witnessed a broad-based recovery in rural demand supported by a record Kharif harvest, enhanced public welfare expenditure and favourable weather conditions. While the manufacturing sector contended with elevated input costs and muted global demand,

Private Final Consumption Expenditure (PFCE) registered a 7.6% growth, propelled by sustained domestic consumption and improved household sentiment.3 Capital formation remained strong, driven by robust government infrastructure investments.

Headline inflation moderated to 3.3% in March 2025, well within the Reserve Bank of Indias target range.4 The economic landscape was further bolstered by easing food inflation and prudent monetary interventions by the RBI. Notably, urban inflation slightly increased while rural inflation recorded a sharp decline, narrowing the rural-urban disparity in price levels.

Outlook

Indias growth outlook remains favourable, supported by strong domestic demand, structural reforms and a sustained focus on infrastructure-led development. With continued emphasis on high-capacity utilisation, productivity enhancement and public investment in sectors, such as transport, digital connectivity and agriculture, the economy is poised for steady growth in the coming years. The Union Budgets allocation of H11.21 lakh crore, representing 3.1% of the GDP towards capital expenditure for FY2025-26 is anticipated to augment private investment and expedite job creation.5

The nation, currently among the top four economies globally, is set to ascend to the third-largest position by FY2028, with a projected GDP of $5 trillion.6 Recent tax relief measures for salaried individuals and middle-income households are expected to catalyse urban consumption, while enhanced allocations for rural development and skilling will support inclusive growth. As inflation stabilises and global volatility recedes, Indias economic fundamentals are expected to sustain investor confidence and long-term business momentum.

Industry overview

Global apparel industry

The global apparel industry remains on a strong growth trajectory, with the market expected to scale approximately $766.62 billion in CY2025 and further ascend to $1,010 billion by CY2029 at a CAGR of 7.2%.7 This momentum is fuelled by the proliferation of e-commerce, heightened digitisation and the continued emergence of new consumer segments, especially in developing regions. Advancements, such as the integration of Artificial Intelligence (AI) for design and demand forecasting, blockchain for supply chain transparency, immersive online shopping experiences and a growing inclination towards eco-conscious materials have become integral to the sectors evolution.

Amid evolving geopolitical realignments, intensifying trade barriersandescalatinginputcosts,globalbrandsareprogressively diversifying beyond China towards India, Vietnam, Bangladesh and nearshoring markets like Mexico and Turkey. The China +1 strategy has become integral to mitigating operational risks, managing cost volatility and ensuring compliance with evolving ESG imperatives. Substantial new investment and export volume shifts towards alternative sourcing hubs is being noted.

Sustainability and circularity have become foundational mandates for global brands, driven by both shifting customer sensibilities and stringent EU regulatory mandates. The industry faces strict requirements for traceability, recycled content, decarbonisation and supply chain transparency. In response, major brands are directing capital towards eco-friendly fibres, cleaner production processes and circular business models.

Imports of textile and apparel into USA8

(USD billion)

Particulars	2023	2024
World	104.9	107.7
ASEAN	26.4	28.2
China	25.2	26.1
Vietnam	15.3	16.3
Bangladesh	7.5	7.5
India	9	9.6

Growth drivers

Expanding middle class and urbanisation

The sustained expansion of the global middle class, particularly in emerging economies continues to serve as a fundamental driver of growth for the apparel industry. Rising urbanisation, coupled with increasing disposable incomes are creating consumer demand for apparel across diverse price segments. Demographic transitions and a youthful population with evolving style priorities are creating diverse product demand in emerging economies.

Shift in global sourcing patterns

Shifting global equations, recalibrated trade policies changes and the growing adoption of China +1 strategies are compelling global brands to diversify their sourcing frameworks. India is increasingly emerging as a sourcing destination of choice, facilitated by competitive labour costs, favourable trade agreements and improving ease of doing business.

Recent tariff realignments in the US have created an uncertainty for Indian exporters, with Indias apparel tariffs standing significantly lower than those of China but higher than Bangladesh, Cambodia and Vietnam. However a positive turn around expected in the ongoing discussions with US Government

Growing focus on sustainability and compliance

Sustainability imperatives have become a core consideration for global brands and consumers alike. Ascending demand for organic, ethically sourced and eco-conscious products is reshaping sourcing and manufacturing practices. Apparel exporters with international certifications and transparent, traceable supply chains are fast emerging as preferred partners in global procurement networks.

E-commerce expansion

The exponential growth of online retail is altering the global apparel ecosystem. Digital-first consumers, faster fulfilment cycles and the proliferation of direct-to-consumer (D2C) brands are pushing manufacturers to reorient their supply chains with greater agility, shorter turnaround times and digitised production systems. Rapid penetration of online channels is transforming the consumer journey, with digital sales comprising an increasing share of global apparel revenues. Enhanced ERP systems, omnichannel experiences, social commerce and predictive data analytics are being utilised by brands to enhance personalisation and elevate consumer journey and service.

Indian apparel industry9

Indias apparel and textiles industry continues to anchor itself firmly within the nations economic framework, with steadily rising exports and global relevance. The sector is a significant driver of employment, providing direct jobs to upwards of 45 million people across manufacturing, logistics and allied services including a large proportion of women and rural populations, making it the second-largest employment provider in the country after agriculture. Strong domestic demand propelled by expanding middle-income demographic, shifting consumption habits and expedited urbanisation is driving market expansion. Formalisation of supply chains and swift growth of organised retail are further bolstering growth. The total market size of Indias textile and apparel sector is projected to rise to $350 billion by 2030.

Government-led initiatives in India are opening fresh opportunities by advancing diversification, encouraging innovation and emphasising man-made fibres, technical textiles and sustainable manufacturing. Further, India is among countries producing all five principal natural fibres including cotton, jute, silk, wool and linen and is channelling its investments towards both natural and synthetic fibres to meet the dynamic requirements of global clients.

Indias total textile and apparel exports stood at USD 34.4 billion in 2023-24. Apparel constitutes the largest segment within Indias textile value chain, accounting for an estimated 42% of total textile and apparel exports, with the United States and European Union collectively representing around 47% of export destinations.

Indias fully integrated textile ecosystem, spanning raw fibre to finished garment and its abundant, economically efficient workforce have position Indias with a fully integrated value chain from fibre to finished products and a large, cost-efficient workforce, India continues to be a preferred sourcing hub for global fashion brands. The industrys strategic position is further strengthened by geographic diversification, robust export capabilities and sustained policy support, placing it at a pivotal point for accelerated growth.

Major policy support, including the Make in India initiative, ProductionLinkedIncentive(PLI)schemesandtheestablishment of integrated textile parks under the PM MITRA programme, has augmented investment, efficiency and technology modernisation across the sector. These advancements, combined with a relatively favourable tariff regime and a substantial pipeline of trade agreements, enable Indian apparel manufacturers to compete effectively in an evolving global landscape.

Indias top ten export markets of textile and apparel products including handicraft11

Country	Export 2023-24 (USD million)	% Share
USA	10,047	28%
EU-27	6,985	19%
BANGLADESH PR	2,816	8%
U ARAB EMTS	2,019	6%
UK	2,015	6%
CHINA PRP	1,133	3%
SRI LANKA DSR	696	2%
TURKEY	665	2%
AUSTRALIA	660	2%
SAUDI ARAB	551	2%
Rest of world	8,287	23%
Total Textiles and Apparel	35,874	100%
(incl. Handicraft) Exports

Government initiatives12

The Government of India has intensified its focus on making the textile and apparel sector globally competitive through a comprehensive array of policy measures, infrastructure investments and targeted incentive schemes. These interventions play a crucial role in powering the sectors modernisation, export readiness and long-term resilience.

A prominent milestone for FY2025-26 is the announcement in the Union Budget of an outlay of H5,272 crores for the Ministry of Textiles, representing a 19% increase over the previous years allocation. This significant budgetary enhancement underlines the governments commitment to expanding technology adoption, cluster development, export promotion and skill-building initiatives across the textile value chain.

Production Linked Incentive (PLI) Scheme

This marquee initiative, with an outlay of H10,683 crore, is strategically designed to catalyse domestic production of Man-Made Fibre (MMF) garments, fabrics and technical textiles. The scheme incentivises large-scale investment, seeks to expedite technological infusion and enhance India s global competitiveness in high-growth and value-added textile verticals.

PM MITRA Parks (Mega Integrated Textile Region and Apparel Parks)

With a financial commitment of H4,445 crore until 2027-28, the PM MITRA scheme envisions the creation of seven world-class textile parks across key states in India. These integrated parks will offer cutting-edge, plug-and-play infrastructure encompassing spinning, weaving, processing and garmenting to reduce logistics costs, enhance competitiveness and enable globally scalable supply chains for apparel exports.

Amended Technology Upgradation Fund Scheme (ATUFS)

Designed to promote modernisation across the MSME-driven textile sector, ATUFS offers capital subsidies for the adoption of emerging technologies. With a total allocation of H17,822 crore, the scheme accelerates the adoption of advanced machinery, elevates productivity and strengthens Indias overall export readiness in competitive global markets.

Samarth (Scheme for capacity building in textile sector)

This comprehensive skill development programme is aimed at bridging the talent gap in the textile and apparel value chain. Samarth focuses on empowering women and rural youth through industry-relevant training. With over 4.78 lakh trainees registered and 3.82 lakh placed by March 2025, Samarth is supporting both job creation and sectoral modernisation.

Opportunities and Threats

Opportunities

Export growth

Indias apparel exports are poised for robust growth, buoyed by global supply chain realignments under the China +1 strategy, political instability in competing hubs, such as Bangladesh and favourable tariff differentials in key markets like the US. As global buyers shift away from higher-tariff or less stable countries, Indian exporters are well positioned to capitalise on this opportunity and expand market share and volume growth.

Rising domestic demand

The Indian apparel market, valued at over USD 110 billion in 2024, continues to grow at a steady pace on the back of an expanding middle class, rising discretionary incomes and an increasingly fashion-conscious youth demographic. Accelerated urbanisation and rural penetration are providing robust demand across value and premium segments.

Policy and infrastructure support

Government initiatives, such as the Production Linked Incentive (PLI) Scheme for textiles, PM MITRA integrated textile parks and the Samarth Skill Development Programme are attracting large-scale investments, propelling capacity expansion and employment generation. These programmes are expected to enhance Indias global competitiveness and attract long-term capital into the sector.

Integrated value chain

Indias ability to offer a complete, vertically integrated textile value chain—from raw material to finished product confers a distinct competitive edge. It positions the nation to benefit from end-to-end cost and quality control, rapid scaling and targeted product innovation across cotton, jute, silk, wool and technical textiles.

Abundant skilled labour and training

Indias demographic advantage, with an expansive and skilled workforce, presents a structural opportunity to support both domestic growth and export expansion. Focus on women and rural employment further enhances inclusive capacity building.

Threats

Global economic and trade uncertainty

Theapparelexportsectorremainssusceptibletomacroeconomic headwinds, such as high inflation in key markets like the US and Europe and evolving trade frameworks. A downturn in global demand or the imposition of adverse tariff regimes can directly impact export volumes and profitability.

Competition from low-cost economies

India faces formidable competition from countries, such as Bangladesh, Vietnam and Cambodia, which offer lower labour costs, preferential trade access and targeted incentives. In the absence of sustained policy support and efficiency upgrades, Indian manufacturers may struggle to retain market share in strategically important geographies.

Company overview

Kitex Garments Limited is globally recognised as one of the foremost manufacturers of infant and childrens apparel, renowned for its strong export orientation and vertically integrated operations that span the entire garment value chain. The Companys strength lies in its advanced manufacturing technology, stringent quality benchmarks and ESG-driven processes, which collectively position it as a preferred partner of global retail giants.

The Companys robust infrastructure, a daily production capacity of 432,000 garments and integrated textile processing support its expansive global presence. The Company generates 78% of its aggregate revenue through exports. Kitexs ongoing strategic investments in innovation, sustainability and capacity augmentation, as well as major projects in Telangana, are fuelling its ambitions to capture greater global market share and diversify into adjacent product categories.

Operational highlights

Strategic expansion

The Company marked a crucial milestone with the successful commencement of commercial production at Phase I of its Warangal facility in April 2025 under Kitex Apparel Parks Limited (KAPL). This represents a major leap in its long-term capacity expansion strategy. The Phase II, located in Hyderabad is scheduled to become operational in March 2027. At full operational capacity, these projects are envisioned to generate annual revenues of H5,000 crore, create employment opportunities for nearly 25,000 individuals and substantially augment the groups global supply capabilities.

Portfolio diversification

Kitex continued to broaden its product and market footprint by diversifying into cotton, polyester, blended garments, polar fleece, mens and ladies wear and essential packaging materials. The Company supplies to the top 20 global brands and leverages Indias favourable export tariff framework, which offers distinct cost advantages over key competitors in China, Vietnam and Cambodia. Its competitive edge is further strengthened by a suite of industry certifications, including GOTS, OEKO-TEX and WRAP, ensuring alignment with the stringent compliance requirements of international buyers.

Consolidated financial performance

During FY25, the Company recorded an operating revenue of H98,280.46 lakhs, marking a substantial growth over the previous years H61,692.20 lakhs. This sharp increase highlights the Companys successful execution of expansion initiatives, improved capacity utilisation and deeper penetration in key export markets. The operational scale-up was further bolstered by sustained demand from leading global clients in the infant and childrens apparel segment.

EBITDA for the year stood at H23,648.33 lakhs, reflecting a considerable elevation of 86.04% compared to H12,711.76 lakhs in FY24. The year-on-year improvement in EBITDA can be primarily attributed to higher revenue realisation, operating leverage and sustained emphasis on process efficiencies and cost optimisation.

Profit after tax for the year reached H 15,295.33 lakhs, representing substantial bottom-line growth as compared to H 6,818.77 lakhs in the previous fiscal.

The Company reported basic and diluted earnings per share of H 7.67 for FY25. The Board of Directors has recommended a final dividend of H0.50 per equity share of H1 face value, subject to approval by the shareholders at the ensuing annual general meeting.

Kitex Garments continued to maintain a strong balance sheet, supported by healthy cash flows and disciplined capital allocation towards facility expansion, technology upgrades and vertical integration. The Company remains well-placed for future growth, backed by prudent financial management and sustained investments aligned with its long-term growth objectives.

Revenue

(INR in lakhs)	FY 25	FY 24	Change
Operating revenue	98,280.46	61,692.20	36,588.26
Other income	3,660.96	2,467.06	1,193.90

Cost of materials

(INR in lakhs)	FY 25	FY 24	Change
Cost of raw materials consumed (including Purchase of stock in trade	42,244.62	25,514.47	16,730.14
and Changes in inventories of FG, traded goods and WIP)
Operating revenue	98,280.46	61,692.20	36,588.26
Cost of materials / Operating revenue	42.98%	41.36%	1.63%

Employee benefits

(INR in lakhs)	FY 25	FY 24	Change
Employee benefits	15,833.66	11,939.36	3,894.30
% of Revenue	16.11%	19.35%	-3.24%

Finance costs

(INR in lakhs)	FY 25	FY 24	Change
Finance costs	1,401.72	733.19	668.53
% of Revenue	1.43%	1.19%	0.24%

Depreciation and amortisation

(INR in lakhs)	FY 25	FY 24	Change
Depreciation cost	1,571.67	2,070.40	-498.73
% of Revenue	1.60%	3.36%	-1.76%

Other expenses

(INR in lakhs)	FY 25	FY 24	Change
Other expenses	20,214.82	13,993.67	6,221.15
% of Revenue	20.57%	22.68%	-2.11%

Income tax

(INR in lakhs)	FY 25	FY 24	Change
Income tax	5,379.61	3,089.41	2,290.21
Profit before tax	20,674.94	9,908.17	10,766.77
Tax as % of Profit before tax	26.02%	31.18%	-5.16%

Credit rating

During the year, India Ratings & Research Private Limited has assigned the credit rating of the Company as follows:

Loan facility	Rating as of March 2025
Fund-based working capital limit	IND A/Stable/IND A1
Non-fund-based working capital limit	IND A/Stable/IND A1
Proposed fund based working capital limit	IND A/Stable/IND A1

Key ratios

Ratios	As at March 31, 2025	As at March 31, 2024
Current Ratio, (times)	2.47	3.44
Return on Equity Ratio (%)	13.83	7.17
Inventory turnover ratio (in days)	157	201.01
Trade Receivables turnover ratio (in days)	117	145.67
Trade payables turnover ratio (in days)	61	72
Net capital turnover ratio (in days)	337	243
Net profit ratio (%)	15.00	11.00
Return on Capital employed (%)	19.90	10.00

Risk and mitigation

Risks	Description	Mitigation
Financial Risks	Volatility in foreign exchange and interest rates can affect the Companys profitability, heighten borrowing costs and impede planned capital expenditure or expansion initiatives.	The Company follows a proactive financial risk management policy aligned with the Board-approved guidelines. To address currency fluctuations, hedging strategies are employed, while interest rate exposure is managed through a conservative funding approach and cost-effective borrowing practices.
Commodity Price Risks	Instability in global supply chains price variability in raw material prices, especially cotton and other textile inputs, pose a significant risk to the Companys cost structure and pricing strategy.	The Company actively mitigates this risk through strategic sourcing arrangements, forward contracts and strong vendor partnerships. Its reputation for quality and value enables flexibility in pricing, while brand positioning in key markets helps absorb short-term cost shocks.
Regulatory Risks	Non-compliance with evolving domestic and international regulations including those pertaining to labour laws, environment and trade policies could result in penalties, reputational harm and operational disruptions.	The Company undertakes regular internal audits and consults legal experts to stay updated on regulatory changes. Comprehensive compliance checks are embedded across its operational protocols, supplemented by third-party audits and customer-driven assessments.
Human Resource Risks	Operating within a competitive labour market, the Company faces challenges in attracting, retaining and developing skilled professionals, which is critical to sustaining innovation and operational efficiency.	A structured human capital strategy is in place. This approach encompasses skill development, performance-linked rewards and leadership grooming. The Company also collaborates with institutions such as the Integrated Skill Development Scheme (ISDS) to create a future-ready talent pipeline.
Strategic Risks	Long-term risks arising from capital allocation decisions, market expansion initiatives and potential misalignment with consumer trends can affect the Companys growth trajectory.	To navigate these risks, the Company regularly reviews its growth roadmap and monitors macroeconomic shifts to recalibrate its expansion priorities.
Environmental and Sustainability Risks	The growing emphasis on sustainability among global consumers, regulators and brand partners could diminish the Companys competitiveness if environmental standards are not met. Non- compliance with ESG norms may result in reduced access to premium markets and erode investor confidence.	The Company has embraced a zero-discharge, zero- pollution manufacturing philosophy. All dyes and chemicals used are organic and are sourced from certified suppliers. Manufacturing operations adhere to global ESG norms, supported by industry-leading sustainability certifications and full traceability from farm to finish.

Internal control systems and their adequacy

The Company has established a comprehensive internal control system to safeguard assets, prevent unauthorised use or loss and ensure that transactions are properly authorised, recorded and reported. This control framework is maintained through documented policies, guidelines and procedures and is supported by a thorough internal audit program conducted by trained in-house personnel. The audit committee periodically reviews audit findings and corrective actions to ensure the systems effectiveness. This internal control system is designed to ensure that financial and other records are reliable for preparing accurate financial statements and maintaining accountability. Additionally, the Company has engaged M/s. K Venkatachalam Aiyer & Co, Chartered Accountants, to perform the Internal Audit for the year 2024-25.

Human resource

The Companys Human Resource strategy continues to prioritise building a productive, inclusive and future-ready work environment. As of March 31, 2025, the Company employed 5258 individuals, with a significant representation of women, reflecting its resolute commitment to diversity, equity and inclusion.

The Company continues to uphold pay equity across all levels to ensure fairness and transparency in its compensation practices. Its HR architecture is geared towards establishing a culture of continuous learning, professional development and employee well-being. With an emphasis on industrial harmony and collaborative engagement, the Company strives to build a motivated workforce capable of supporting its rapid expansion and evolving business aspirations.

Outlook

Kitex Garments Limited is expected to enter a new phase of transformative growth, facilitated by substantial investments in capacity augmentation, sustained global demand and an increasingly favourable sourcing landscape for Indian apparel exporters. FY2025 witnessed the successful commissioning of the Groups state-of-the-art, fully integrated manufacturing facility at Warangal (Phase I) under Kitex Apparel Parks Limited (KAPL), with Phase II at Hyderabad envisioned to commence operations by 2027. Together, these facilities represent a cumulative investment of H3,550 crore and are equipped with world-class infrastructure, imported and automated machinery and seamless vertical integration from raw material procurement to finished goods.

Strategically aligned with major shifts in the global supply chain landscape including the acceleration of the China +1 strategy, evolving US tariff structures that favour Indian production and diversification efforts by leading international brands- Kitex is firmly placed to capture incremental export market share. The Company aspires to cater to at least 1% of US apparel requirements, leveraging Indias competitive tariff advantage and Kitexs industry certifications, ESG-compliant manufacturing practices and proven reliability. The Groups integrated value chain, focus on sustainability and track record for social responsibility combined with a diversified product portfolio spanning cotton, polyester, blends and new fashion segments ensure its preparedness to meet the dynamic requirements of global clients . With an expanded operational footprint, resilient order visibility and sustained government policy support, the Company is well placed to deliver sustained, profitable growth as a preferred supplier to the worlds leading apparel brands.

Cautionary statement

Statements in this document that outline the Companys expectations or forecasts are considered ‘forward-looking statements. Actual results may vary from these expectations. Key factors that could impact the Companys performance include market conditions, input costs, government regulations and economic developments both within and outside the country.