Kitex Garments Limited’s plan to bring the textile business of Kitex Childrenswear Limited into the listed company has cleared an important approval hurdle.
Kitex Garments informed the stock exchanges on 27 July 2026 that its equity shareholders and unsecured creditors had approved the scheme at meetings convened under the directions of the National Company Law Tribunal’s Kochi Bench.
The scheme received strong support among the Kitex Garments shareholders who voted.
A total of 13,08,74,373 equity votes were cast in favour of the resolution, while 9,88,084 votes were cast against it. This means approximately 99.25% of the valid equity votes by value supported the scheme.
Unsecured creditors also approved the scheme. Creditors representing claims worth ₹17,19,50,344 voted in favour, while ₹75,225 voted against. This amounts to support of approximately 99.96% by value among creditor votes cast.
This is not a complete merger of Kitex Childrenswear Limited, or KCL, with Kitex Garments Limited, or KGL.
Instead, KCL proposes to separate its textile undertaking and transfer it to listed Kitex Garments as a going concern.
The business being transferred includes:
KCL’s infant-wear manufacturing operation at Kizhakkambalam
Assets and liabilities connected with the textile business
KCL’s 30% holding in Kitex Apparel Parks Limited
KCL’s 50% holding in Kitex USA LLC
Employees, contracts, licences and other rights connected with the undertaking
Kitex Childrenswear will continue as a separate unlisted company after the demerger. It will retain its investment in Kitex Garments, investments and advances connected with other group companies, and certain land and building assets.
In simple terms, most of the group’s garment manufacturing and distribution operations will be consolidated under listed Kitex Garments. Kitex Childrenswear will become largely an investment and asset-holding company.
Kitex Garments currently owns 70% of Kitex Apparel Parks, while Kitex Childrenswear owns the remaining 30%.
Similarly, Kitex Garments and Kitex Childrenswear each own 50% of Kitex USA LLC.
Once KCL’s holdings are transferred under the scheme, Kitex Garments will own 100% of both Kitex Apparel Parks and Kitex USA.
This would give the listed company direct control over the group’s apparel manufacturing investment in Telangana and its distribution operation in the United States.
The textile undertaking represents almost all of Kitex Childrenswear’s operating revenue and profit.
According to the financial information submitted as part of the scheme, the division being transferred accounted for:
100% of KCL’s turnover in 2023-24
Around 96.7% of its profit after tax
Around 74.4% of its net worth
As at 31 December 2024, the transferred undertaking had assets of approximately ₹359.96 crore and liabilities of around ₹72.23 crore.
The transaction is therefore considerably more substantial than the transfer of a small division. It effectively moves KCL’s principal revenue-generating business into Kitex Garments.
Kitex Garments will not make a cash payment to Kitex Childrenswear.
Instead, it will issue new KGL shares directly to KCL’s shareholders. The proposed entitlement is:
9,706 Kitex Garments shares of face value ₹1 each for every 100 Kitex Childrenswear shares of face value ₹100 each.
Existing Kitex Garments shareholders will not receive additional shares under the scheme. The new shares are being issued to KCL shareholders as consideration for the business transferred to KGL.
Kitex Childrenswear is almost entirely owned by Kitex Garments Managing Director Sabu M Jacob. Consequently, he is expected to receive most of the new KGL shares issued under the arrangement.
The proposed share issue will increase Kitex Garments’ total equity shares from 19.95 crore to approximately 29.17 crore.
This means that about 9.22 crore new shares will be issued, increasing the company’s share count by roughly 46%.
The scheme documents show the following changes:
KCL’s number of Kitex Garments shares will remain unchanged. Its percentage holding falls because KGL will issue a large number of new shares.
Public ownership will decline from 43.34% to 29.65%, while direct promoter ownership will rise to 59.46%. Since KCL will remain promoter-controlled and hold another 10.89% of KGL, the restructuring will also strengthen promoter-linked control over the listed company.
Yes. Existing Kitex Garments shareholders will own a smaller percentage of the company after the new shares are issued.
However, percentage dilution does not by itself establish whether existing shareholders gain or lose economically. Kitex Garments will receive an operating garment business, production assets, earnings and additional stakes in Kitex Apparel Parks and Kitex USA in exchange for the shares.
The central question is whether the value and future profits of the transferred undertaking justify the approximately 9.22 crore new shares being issued.
The pro-forma figures submitted under the scheme show Kitex Garments’ net worth increasing from around ₹1,153 crore before the transaction to approximately ₹1,288 crore after it. But the longer-term outcome will depend on earnings growth, capacity utilisation, integration and the performance of the transferred businesses.
The scheme involves the transfer of a business from a promoter-controlled unlisted company to a listed company in return for newly issued listed shares.
For this reason, support from the promoters alone was not sufficient. The number of public shareholder votes cast in favour also had to exceed the number cast against.
The latest results show that 94.75% of the public votes by value supported the proposal. The scheme has therefore passed both the overall shareholder test and the separate public shareholder test.
The shareholder and creditor approvals do not make the restructuring effective immediately. The scheme still requires final sanction from the National Company Law Tribunal’s Kochi Bench, along with any other statutory or regulatory approvals that may be applicable.
If the scheme is sanctioned and becomes effective, Kitex Garments will issue new shares to eligible shareholders of Kitex Childrenswear according to the approved entitlement ratio. A separate record date will be fixed for identifying those shareholders.
The latest exchange filing does not specify when the NCLT will consider the scheme or provide a timeline for the record date, share allotment or completion of the restructuring.
The latest vote removes a major procedural uncertainty surrounding the restructuring. The immediate development to watch is the final NCLT decision.
If sanctioned and implemented, the scheme will produce two major changes at Kitex Garments.
First, the listed company will become a larger and more integrated garment manufacturer, with full ownership of Kitex Apparel Parks and Kitex USA.
Second, its ownership structure will change significantly. Public ownership will fall, promoter control will rise and the total number of shares will increase sharply.
For existing public shareholders, the longer-term outcome will depend on whether the transferred business contributes enough revenue, profit and growth to compensate for the dilution arising from the new share issue.
