Kitex Garments Ltd Management Discussions

Economic review

Global economy

The global economy grew by 3.5% in CY 2025, maintaining a steady growth trajectory despite trade-related volatilities and policy uncertainties. Economic factors including technological investments, supply-chain realignments, tariff restrictions, Regional conflicts and wars and easing fiscal conditions propelled sustained progress. Inflation moderated to around 4.1%, thereby driving capital inflows and currency stability. This enabled major central banks to implement structured interest rate reductions.

Advanced economies recorded a growth of 1.9% with the US exhibiting steady growth, attributable to robust domestic demand and sustained investments in advanced technologies. Emerging economies expanded by 4.5%, fuelled by significant export performance and steady trade across major Asian economies.

Global economies exhibited notable agility amid external uncertainties. Global trade remained resilient, driven by robust merchandise trade, significant trade advancements and consistent services trade expansion.

Growth in the GDP (%)

Global Economy

Year	GDP Growth (%)
CY 2025	3.5
CY 2026	3.0
CY 2027	3.4

Advanced Economy

Year	GDP Growth (%)
CY 2025	1.9
CY 2026	1.7
CY 2027	1.8

Emerging Market & Developing Economies (EMDEs)

Year	GDP Growth (%)
CY 2025	4.5
CY 2026	3.8
CY 2027	4.5

Global Inflation (%)

Year	Inflation (%)
CY 2025	4.1
CY 2026	4.7
CY 2027	3.9

Source: IMF World Economic Outlook July 2026

Outlook

The global economic outlook remains uncertain amid evolving trade policies, fiscal pressures and persistent geopolitical risks. The conflict in West Asia has escalated macroeconomic tensions, thereby decelerating global economic activity. Global GDP growth is projected to stabilise to 3.0% in CY 2026 before improving to 3.4% in CY 2027. Growth will be propelled by resilient domestic demand, favourable policy measures and gradual monetary easing across major economies.

Global inflation is projected to heighten to 4.7% in CY 2026 before moderating to 3.9% in CY 2027. Easing supply constraints, enhanced demand and moderating labour market pressures will facilitate gradual stabilisation.

Indian economy

India maintained its position among the fastest-growing major economies. In FY 2026, the Indian GDP grew at 7.7%, backed by robust domestic demand and favourable fiscal conditions, thereby promoting sustained economic progress. Inflation moderated to 3.4%, remaining within the Reserve Bank of Indias (RBI) target range of 2% to 6%, indicating lower input costs and supply chain optimisation.

Consistent rural demand, GST rationalisation and easing monetary conditions accelerated private consumption. Input cost minimisation and enhanced supply conditions moderated manufacturing costs across diverse industries, including textiles. The services sector demonstrated resilient performance through cost competitiveness, surging consumer demand and sustained exports.

Indias GDP Growth (%)

Year	GDP Growth (%)
FY 2024	7.2
FY 2025 [FRE]	7.1
FY 2026 [PE]	7.7
FY 2027 [P]	6.6

FRE- First Revised Estimate; PE- Provisional Estimate; P- Projected
Source: RBI Bulletin

Inflation Over the Years CPI Inflation (%)

Year	Inflation (%)
FY 2025	4.6
FY 2026	3.4
FY 2027	5.1

Source: Economic Survey 2025-26; RBI Press Release

Outlook

Economic activity is expected to remain resilient, with GDP growth projected at 6.6% for FY 2026-27, driven by sustained services sector momentum, resilient domestic demand and favourable financial activity. CPI inflation is projected at 5.1% indicating stable food prices, enhanced supply conditions and monetary policies. To propel seamless economic activity, the Monetary Policy Committee (MPC) minimised the repo rate to 5.25% while maintaining a neutral policy stance.

The manufacturing Purchasing Managers Index (PMI) moderated to 55.4 while remaining within the delimited range. A healthy order pipeline was driven by robust consumer demand. The escalation of the West Asia conflict could adversely impact key input availability for downstream sectors, including plastics, textiles, chemicals and synthetic fibres. Despite persisting supply-chain disruptions, the sector remains well positioned for sustained progress through strategic advancements.

The expansion of Indias Free Trade Agreements (FTAs) with the UK, EFTA and New Zealand, along with the agreement with the European Union, is expected to drive competitiveness across the Indian textile and apparel sector. India remains well positioned to capitalise on emerging opportunities with enhanced market accessibility and reduced tariff barriers. Long-term progress will be propelled by strategic supply chain integration and export market diversification, thereby enabling global value chain integration.

Industry overview

Global apparel industry

The apparel market experienced robust expansion. It is projected to augment from $736.58 billion in 2025 to $783.07 billion in 2026 with an estimated CAGR of 6.3%. Growth will be backed by extensive worldwide textile production, rising disposable incomes and the emergence of structured retail. Increasing urbanisation and the presence of low-cost production centres will further drive enduring progress.

The apparel market is expected to maintain its growth momentum. It is forecasted to reach $1.02 trillion by 2030 at a 7% CAGR rate. Surging demand for eco-friendly clothing, the expansion of digital fashion platforms and the progressive adoption of data-driven design will enable consistent scaling. Additionally, direct-to-consumer operations and the growing impact of social commerce will catalyse long-term value creation.

During the forecast period, the escalating demand for sustainable apparel materials, the transition towards fast fashion production and the expansion of online apparel sales channels enabled significant industry advancements. Consistent product innovation, disciplined execution and the prioritisation of customisation will drive future progress with an elevated emphasis on brand-led collections.

Global apparel market

Year	Market Size (USD Billion)
2026	783.07
2030	1,020

Source: Research and Markets

Imports of textile and apparel into USA (USD billion)

Country	2024	2025
World	107.7	103.8
ASEAN	28.2	32.0
China	26.1	17.59
Vietnam	16.3	18.4
Bangladesh	7.5	8.4
India	9.6	9.7

Source: International Trade Administration

Rising disposable income

Increasing disposable income consistently drives apparel demand by enhancing purchasing power and consumer expenditure on discretionary products including clothing and fashion. Economic recovery, remuneration growth and easing inflation have significantly augmented household spending.

Sustainable apparel demand

The surging demand for sustainable apparel materials is reinforced through the prioritisation of environmentally responsible products and circular economy initiatives. Major brands consistently adopt responsible manufacturing practices to drive long-term value creation.

E-commerce expansion

Progressive e-commerce adoption is accelerating apparel sales as consumers increasingly transition towards online platform purchases. The expansion of digital retail channels is accelerating progress across the apparel manufacturing segment.

Technology and product innovation

Manufacturers are increasingly adopting data-driven design processes to address the demand for tailored products. Product functionality is significantly enhanced through direct-to-consumer operations and smart fabric technologies to deliver enduring value with a customer-centric approach.

Indian apparel industry

Indias textile and apparel sector has evolved into a globally competitive, innovation-driven and employment-intensive industry. The market is witnessing a dynamic shift toward e-commerce and sustainability, alongside the surging demand for trendy and tailored clothing requirements. The augmentation of rising disposable incomes and the prioritisation of quality and branded merchandise among the emerging middle class will propel with sustained expansion. The sector provides direct employment to over 5.3 crore individuals and is projected to generate approximately two crore additional jobs over the next three years.

As the sixth-largest exporter of textiles and apparel, India accounts for approximately 4% worldwide export market share.

During FY 2025-26, Indias net exports, including the handicrafts segment, reached ?3,25,339.00 crores. This reinforces the industrys operational resilience amid market volatilities, including global demand uncertainties and fluctuating input costs. Robust exports in the textiles, apparel and handicrafts sector facilitated a positive year-on-year growth across our extensive global footprint. Major markets, including the US, the European Union and the UK, continue to account for over half of the nations exports, while emerging economies including Bangladesh, the UAE, Australia and Canada, are rapidly consolidating their position.

The implementation of Government schemes has catalysed robust progress across the Indian textile and apparel sector. The industry remains well positioned for strategic growth backed by and targeted initiatives including the Production Linked Incentive (PLI) scheme for textiles. Recent amendments have enabled seamless operations through minimised entry barriers. Reducing minimum investment rates, expanding product portfolio and easing turnover requirements have significantly accelerated disciplined project execution. Concurrently, favourable GST rate rationalisation has optimised prices while promoting exports and generating employment across the textile sector.

Indian Textile and Apparel export Values in crore

Year	Value
FY 2026	3,25,339.0
FY 2025	3,19,573.2
Growth	1.8%

Government initiatives

The PM MITRA scheme

The Pradhan Mantri Mega Integrated Textile Region and Apparel (PM MITRA) scheme consists of a cluster-based economic strategy that includes developing seven large-scale textile parks across Tamil Nadu, Telangana, Gujarat, Karnataka, Madhya Pradesh, Uttar Pradesh and Maharashtra with an estimated ?4,445 crore outlay. Subsequently, these parks ensure an investment-ready, plug-and-play infrastructure, alongside common civic resources and facilities, with end-to-end integration, ranging from fibre to finished goods.

The RELIEF scheme launch

The Resilience and Logistics Intervention for Export Facilitation (RELIEF) scheme established by the Government of India under the Export Promotion Mission, monitors and safeguards the Indian exporters who navigate operational constraints from the ongoing conflict in West Asia and the Middle East, alongside maritime disruptions in the Gulf region.

The Tex-Eco initiative

The Tex-Eco Initiative upholds globally competitive and environmentally sustainable Textiles and Apparel (T&A) production, thereby, ensuring that the domestic manufactured products adhere to international sustainability standards and supports heightened accessibility to emerging green markets.

Samarth 2.0 skilling programme

An upgraded skilling programme, Samarth 2.0 aims to modernise the textile skill framework via enhanced integration within industry and academic institutions. Additionally, it propels maximum availability of industry-focused skilled workforce throughout the supply chain.

The RoSCTL and RoDTEP export schemes

The Government introduced the Rebate of State and Central Taxes and Levies (RoSCTL) scheme that applies to apparel, garments and made-ups to strengthen the competitive edge through zero-rated exports. The textile products which remain covered under the RoSCTL scheme are covered under the Remission of Duties and Taxes on Exported Products (RoDTEP) scheme alongside other products.

Opportunities

Surging global buyer-supplier engagements

Bharat Tex 2026 augmented international buyer-seller connections and sourcing interactions, thereby, generating opportunities for Indian apparel exporter base to further secure new contracts and long-standing sourcing partnerships.

Rising demand for MMF-centric apparel

Global apparel consumption is rapidly adopting manmade fibre (MMF)-based garments due to their durable performance and cost-effectiveness, while simultaneously opening new frontiers for manufacturers to diversify beyond cotton products.

Transformation to integrated manufacturing ecosystems

The upgradation of integrated textile value chains is unlocking new horizons for streamlined operations, improved supply-chain efficacy and enhanced export advantage for apparel providers.

Strengthened export opportunities

Indias expanding network of trade agreements, including the UK, EU, New Zealand, UAE and European Free Trade Association (EFTA), is fortifying preferential or duty-free access to key apparel sectors, thereby, enhancing trade performance and supporting market diversification that opens new avenues for further growth trajectory.

Expansion of e-commerce-led exports

Improved market access through digital commerce is supporting the reach of apparel manufacturers to expand overseas, their beyond conventional retail frameworks.

Threats

Volatility in cotton and raw material prices

Fluctuations in cotton availability and prices, including instable cost of fibres, dyes and chemicals, may increase manufacturing expenses and profit crunch.

Intensifying global competition

Robust competition from apparel-exporting countries such as Bangladesh, Vietnam, Cambodia and Indonesia continues to pose threats to the Indian market share concerning key export destinations.

Stringent sustainability and compliance requirements

Rising environmental, traceability and product compliance demands from global buyers and importing markets may elevate compliance costs and operational complexity for exporters.

Company overview

Kitex Garments Limited, incepted in 1992 by Sabu M. Jacob, has emerged at the helm of Indias dominant exporters of knitwear, specialising in toddler and childrenswear. Headquartered in Kizhakkambalam, Kerala, the Company has successfully anchored a resilient footprint in the garment manufacturing industry worldwide, particularly in the childrenswear segment. Moreover, Kitex Garments has undertaken substantial investments for improved sustainable operations, thereby, advancing the development of the local community through prioritising initiatives pertaining to the segments of education, healthcare and social ecosystem.

Correspondingly, the Companys robust infrastructure, with a daily production capacity of 4.32 lakhs garments and unified textile processing facilities, backs its workflows worldwide. Operationalised under an entirely export-focused yarn-to-garments model, the Company caters to significant client base across USA and European markets, thereby, generating 90% of its aggregate revenue through exports. Kitex Garments continues to sharpen its focus on bolstering its production proficiency to address the growing requirements from global customers, while foraging into diverse segments to build a spectrum of offerings to further enter new markets.

Operational highlights

The Warangal unit, of Kitex Apparel Parks Ltd, Subsidiary of Kitex garments Ltd with an installed capacity of 160.35 million pieces, was operationalised on 15 September 2025, ensuring access to cost-effective labour and heightened availability of raw cotton. To mitigate demand hazard, the Group deferred the construction of the Sitarampur facility due to geopolitical unrest and to further stabilise operations at the Warangal unit. Additionally, the construction of the Sitarampur unit is set to commence in 2nd half of FY27, with the milestone to fulfilled by the duration of 18-24 months. The capacity utilisation of the Warangal unit remains likely to improve from FY27 onwards and concurrently cater to emerging requirements from the geographically diversified client base, alongside existing customers.

The Group initiated expansion into the European and Australian markets to reduce its reliability on the US market. It onboarded Hennes and Mauritz (H&M) for the European region, with extended assimilation of new significant buyers from the European and Australian markets during FY26 and FY27, thereby, providing medium-term revenue visibility from non-US sectors. The Groups undertakings assist in bolstering its footprints domestically through launching its products across leading e-commerce platforms.

Consolidated financial performance

During FY26, the Companys operating revenue was value at 71,928 lakhs, against 1,00,135 lakhs in the prior-year. The dip in revenue was due to US Tariff related issues and geo political problems across the Globe. This situation is expected to be reversed in FY 27 due to normalising of US Tariff and signing of EU and UK Trade agreements.

EBITDA for the year was recorded at 8,071 lakhs, against 21,930 lakhs showing a major dip of 13,859 lakhs due to reasons mentioned above along with losses from KAPL since 1st year of operations with minimal sales and major operational expenses along with high depreciation and term loan interest on 1,000 crores loan.

Profit After Tax (PAT) for the year under purview, decreased to (1321) lakhs, against 13575 lakhs last year. Reasons are already explained above.

The Company reported basic and diluted earnings per share of the amount (0.66) for FY26.

Revenue

(INR in lakhs)	FY 26	FY 25	Change
Operating revenue	59,169.06	98,280.46	-39,111.40
Miscellaneous income	4,491.87	3,660.96	830.91

Cost of materials

(INR in lakhs)	FY 26	FY 25	Change
Cost of raw materials consumed (including Purchase of stock in trade and transformation in inventories of FG, traded goods and WIP)	27,788.26	42,244.62	-14,456.36
Operating revenue	59,169.06	98,280.46	-39,111.40
Material expenditure / Operating revenue	46.96%	42.98%	3.98%

Employee benefits

(INR in lakhs)	FY 26	FY 25	Change
Employee benefits	13,000.21	15,833.66	-2,833.45
% of revenue	21.97%	16.11%	5.86%

Finance Costs

(INR in lakhs)	FY 26	FY 25	Change
Finance costs	1,604.97	1,401.72	203.25
% of revenue	2.71%	1.43%	1.28%

Depreciation and amortisation

(INR in lakhs)	FY 26	FY 25	Change
Depreciation cost	1,228.04	1,571.67	-343.63
% of Revenue	2.08%	1.60%	0.48%

Key ratios

Ratios	As at March 31, 2026	As at March 31, 2025	Y-o-Y Change (%)
Current ratio (times)	2.25	2.47	-8.94
Return on Equity Ratio (ROE) (%)	5.04	14.79	-65.94
Inventory Turnover Ratio (ITR) (in days)	210.14	152.75	37.57
Trade Receivables Turnover Ratio (TRTR) (in days)	142.47	110.74	28.66
Trade Payables Turnover Ratio (TPTR) (in days)	75.58	54.45	38.80
Net Capital Turnover Ratio (NCTR) (in days)	216	152.07	41.74
Net Profit Ratio (NPR) (%)	9.62	15.56	-38.21
Return on Capital Employed (ROCE) (%)	6.35	19.74	-67.83

Miscellaneous expenses

(INR in lakhs)	FY 26	FY 25	Change
Other expenditure	13,938.73	20,214.82	-6,276.09
% of revenue	23.56%	20.57%	2.99%

Income tax

(INR in lakhs)	FY 26	FY 25	Change
Income tax	2,160.74	5,379.61	-3,218.87
Profit Before Tax (PBT)	7,850.72	20,674.94	-12,824.22
Tax as % of PBT	27.52%	26.02%	1.5%

Credit rating

Year-round, India Ratings and Research Private Limited (Ind-Ra) has allocated the credit rating of the Company as follows:

Loan facility	Rating as of March 2026
Bank loan facilities	IND A/Negative/IND A1
Bank loan facilities	IND A/Negative/IND A1

Reasons for changes greater than 25%

• 8.94
• 65.94 There has been decrease in profit during the year in line with decreased operations and sales on account of imposition of additional US Tariff rates.
• 37.57 Mainly due to decreased revenue during the period owing to imposition of additional US Tariff rates.
• 28.66 Mainly due to decreased revenue during the period owing to imposition of additional US Tariff rates.
• 38.80 While the trade payables has decreased, a substantial decrease was operations and purchases on account of the US tariff Rates
• 41.74 Net capital turnover ratio has declined as turnover has declined around 40% in the current year.
• 38.21 Majorly due to margin crunches on additional tariffs US Tariffs imposed contrary to increased finance cost charges during the year owing to increased usage of credit facilities.
• 67.83 There has been decrease in profit during the year in line with decreased operations and sales on account of imposition of additional US Tariff rates.

Outlook

Coming out of Global and geo-political challenges Kitex Garments Limited is poised for a bounce back in FY 27 with export orders back to the level of FY 25 and consequent enhancement in turnover and profits. We are also establishing Europe as an alternative to USA. With FTA now operative with Europe and UK we expect our business to flourish more internationally. In addition, we have launched our international brand Little Star through on line in the domestic market.

The future growth of the Group will be through expansion in Warangal, Telangana through the Subsidiary Company, Kitex Apparel Parks Ltd, where commercial production has started already and substantial production lines are being added during FY 27. After the dip in overall business Globally due to tariff issues and wars, we expect a rebound including in the Textile business in a major way. And we are in an advantageous position due to the above mentioned expansion which will be fully implemented in FY 28. The Phase II at Sitarampur, Hyderabad is expected to start construction during FY 27 and expected to be commissioned in FY 29. Together, these facilities represent a cumulative investment of 3,550 crores and are equipped with world-class infrastructure, imported and automated machinery and seamless vertical integration from raw material procurement to finished goods and the Group is expected to reach a turnover of 7,000 crores once Sitarampur also achieved optimal Capacity.

Risk and mitigation

Risks	Description	Mitigation
Financial hazards	Fluctuations in foreign exchange and interest rates may adversely impact the Companys profitability, raising borrowing costs and causing delays in planned capital expenditures or for growth initiatives.	The Company implements a proactive financial risk management policy in compliance with Board approved directives. To manage currency variations, hedging strategies are implemented, with interest rate exposure controlled through a conservative funding strategy and economical borrowing undertakings.
Commodity price threats	Global supply chain volatility and price variability in raw materials, pertaining to cotton and other textile inputs, further pose a significant hazard to the Companys cost structure and pricing strategy.	The Company actively minimises this risk via strategic sourcing agreements, forward contracts, alongside robust supplier partnerships. Its reputation for quality and value ensures flexibility in pricing and concurrent brand positioning in key markets to absorb near-term expenditure volatility.
Regulatory crosswinds	Non-adherence with dynamic domestic and international regulations, especially those related to labour laws, environment and trade policies may further result in penalties, reputational damage and operational disruptions.	The Company conducts regular internal audits and consults legal specialists to remain updated on regulatory modifications. Comprehensive compliance checks are integrated across its operational protocols, supplemented by independent third-party audits and customer-led evaluations.
Human resource risks	Operating within a competitive labour industry, the Company undergoes challenges in attracting, retaining and upskilling its professionals, which is key to optimising innovation, alongside operational efficiency.	A systemised human capital strategy is currently underway. This approach includes skill development, performance-based rewards, perquisites like free accommodation, food and medical facilities and leadership enhancement. Moreover, the Company partners with institutions such as the Integrated Skill Development Scheme to construct a future-ready talent pipeline.

Risks

Risks	Description	Mitigation
Strategic constraints	Long-term risks arising from capital allocation selections, market expansion initiatives and potential misalignment with consumer trends may adversely affect the Companys growth trajectory.	To navigate these risks, the Company considers regular reviews for its growth roadmap and monitors macroeconomic transformations to recalibrate its expansion priorities.
Environmental and sustainability challenges	The heightening emphasis on sustainability among global consumers, regulators and brand partners may diminish the Companys competitiveness if environmental benchmarks are not met. Non-compliance with Environmental, Social and Governance (ESG) norms may result in declined access to premium markets, thereby, decelerating investor confidence.	The Company has implemented a zero discharge, zero pollution manufacturing philosophy. All dyes and chemicals utilised are organic and are sourced from certified suppliers. Manufacturing operations adhere to global ESG norms, supported by industry leading sustainability certifications and completed 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.

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.