Kitex Group Promoters decide to consolidate Childrenswear business

The Board of Directors of Kitex Garments Limited considered the Kitex Childrenswear Limited proposal and have approved a “Scheme of Arrangement between Kitex Childrenswear Limited and Kitex Garments Limited and their respective shareholders and creditors”, in compliance with Sections 230 to 232 and other applicable provisions of the Companies Act, 2013 (“Scheme”).

- Anirudha Jain

Companies Involved:

Kitex Garments Limited (“KGL” or “Resulting Company”) is engaged in the manufacturing and export of knitted garments for infants and kids. The equity shares of KGL are listed on nationwide bourses.

Kitex Childrenswear Limited (“KCL” or “Demerged Company”) is a promoter group company of KGL which is also engaged in the manufacturing of babywear garment products. It also undertakes job work assignments for KGL. As on date, KCL holds 15.92% equity stake in KGL. The equity shares of KCL are not listed anywhere.

The Proposed Transaction

The approved Scheme, inter alia, provides for the demerger of the Textile Business Division of the KCL into KGL (“Proposed Transaction”).

“The Textile Business Division of KCL” is engaged in the manufacturing, selling, exporting etc of children's garments and apparel and related services, activities, operations as a going concern. Further, the textile business also includes KCL's 30% stake in Kitex Apparel Parks Limited (KAPL) and 50% holding Kitex USA LLC.

KAPL is incorporated to engage in the same business and is a subsidiary of KGL (70%) and an associate company of KCL. Post-consolidation of KCL with KGL, KAPL will become wholly owned subsidiary of KGL. Currently, KAPL is in the process of establishing its plant which is announced for a massive expansion of INR 2890 crore through a mix of debt & equity in the state of Telangana. It is pertinent to note that the stake held by KCL in KGL (15.92%) shall not form part of the textile business division and shall continue with KCL.

Kitex USA LLC's networth has eroded however, the management expects revival on account of its new big customer in USA.