Kitex Garments Limited has secured the requisite approvals from its equity shareholders and unsecured creditors for the Scheme of Arrangement involving the demerger of Kitex Childrenswear Limited. The resolutions were passed during meetings held on July 24, 2026, following an order dated January 22, 2026, by the Hon'ble National Company Law Tribunal (NCLT), Kochi Bench. This development clears a critical regulatory hurdle, allowing the company to proceed with filing the scheme for final sanction by the tribunal, thereby enabling the structural separation of its childrenswear business.

The voting process was conducted via video conference, adhering to Sections 230 to 232 of the Companies Act, 2013, and Regulation 44(3) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Remote e-voting was available from July 20, 2026, to July 23, 2026, while e-voting at the meeting was facilitated for those who had not voted remotely. CA Rajmohan R served as the scrutinizer for both meetings, ensuring compliance with statutory requirements. The proceedings were chaired by Mr. Kuldip Kumar Kareer, a former Judicial Member of the NCLT.

Equity Shareholder Voting Results

The resolution approving the scheme received overwhelming support from equity shareholders. A total of 175 out of 1,02,519 eligible equity shareholders participated in remote e-voting, with one additional shareholder voting during the meeting. The votes cast in favor represented 99.994% of the total valid votes cast by all shareholders. Among public shareholders, who are distinct from the promoter group, 144 shareholders voted in favor, accounting for 99.96% of public votes cast. Only 25 shareholders voted against the resolution, representing a negligible fraction of the total vote value.

Unsecured Creditor Approval

Unsecured creditors also approved the scheme with significant majority support. Out of 335 eligible unsecured creditors, 60 participated in remote e-voting, and one creditor voted during the meeting. The total value of votes cast in favor was ₹17,19,50,344, representing 99.984% of the valid votes cast. Only one creditor voted against the resolution, with a value of ₹75,225. The quorum requirement was met with 15 creditors holding outstanding amounts totaling ₹88,59,882 as of March 31, 2026, present at the start of the meeting.

Regulatory Compliance and Next Steps

The company confirmed that proxy voting was not permitted for these meetings. The scrutinizer’s reports, detailing the voting outcomes, have been filed with the Bombay Stock Exchange (BSE) and the National Stock Exchange of India (NSE). Cyriac & Associates, Chartered Accountants, certified the list of unsecured creditors as of March 31, 2026, confirming a total of 335 creditors with outstanding amounts totaling ₹24,90,33,872. With both shareholder and creditor approvals secured, Kitex Garments will now approach the NCLT for the final sanction of the Scheme of Arrangement, subject to any conditions imposed by the tribunal or other regulatory authorities.

Kitex Garments Limited has filed an addendum to the notice for its equity shareholder meeting scheduled on July 24, 2026, regarding the scheme of arrangement with Kitex Childrenswear Limited. The meeting, authorized by the National Company Law Tribunal, Kochi Bench, aims to consolidate the textile business division of Kitex Childrenswear Limited into Kitex Garments Limited. This strategic move is intended to facilitate focused growth, operational efficiencies, and better market share in the infant garment manufacturing sector.

The scheme involves the demerger of the textile undertaking from Kitex Childrenswear Limited and its merger into Kitex Garments Limited. As consideration, Kitex Garments Limited will issue new equity shares to the shareholders of Kitex Childrenswear Limited based on a share entitlement ratio. The transaction is structured to optimize business operations and achieve economies of scale by combining similar activities under a single entity.

Financial Projections and Valuation

The addendum provides detailed financial projections for the resulting entities. For Kitex Garments Limited, revenue is projected to rise from ₹1,347 crore in FY26 to ₹2,460 crore by FY30, with Profit After Tax (PAT) expected to reach ₹738 crore in the same period. The demerged undertaking (KCL-DU) anticipates revenue growing from ₹820 crore in FY26 to ₹1,322 crore in FY30.

Valuation metrics based on comparable companies, including Gokaldas Exports Limited and S.P. Apparels Limited, indicate an average forward EV/EBITDA multiple of 12.01 and a forward P/E multiple of 19.7 for FY26.

Post-Transaction Structure

Upon completion of the scheme, the shareholding pattern of Kitex Garments Limited will change significantly. Promoters' holding is expected to increase to 59.46%, while public shareholding will dilute to 29.65%. Kitex Childrenswear Limited's stake in Kitex Garments Limited will reduce from 15.92% to 10.89%.

The net worth of Kitex Garments Limited is projected to increase to ₹1,28,775.19 lakh post-arrangement, while Kitex Childrenswear Limited's net worth will adjust to ₹8,826.31 lakh following the demerger. The company confirmed that the scheme is in compliance with applicable securities laws and that no regulatory actions are pending against the involved entities.

Source: https://lodr-files.dhan.co/lodr-inputs/Company/INE602G01020/2e92aff6a80c4067.pdf