KOCHI: Kitex Garments Ltd (KGL) shares, which closed at their lowest levels in four months on Thursday, have been hit hard by high tariffs announced by the US, its largest market.
The company, which derives over 90 per cent of its revenue from the US, saw its shares close at Rs180.21 on the NSE, losing approximately 5 per cent or Rs9.5 in value in a single day and taking its market capitalisation down to Rs3,600 crore.
This unexpected move by the US is raising concerns that it could derail the group’s ambitious new projects. Kitex is in the process of setting up integrated textile units in Telangana in two phases, under Kitex Apparels Park (KAPL), at an initial estimated cost of Rs2,890 crore.
The project is being funded through a 70:30 mix of term loans and promoter contributions, drawing loans of around Rs 2,000 crore from financial institutions.
A Kitex official, speaking to businessbenchmark.news, confirmed that the US move will “certainly cast a dark shadow on this ambitious project.” He added, “US has been our largest market contributing around 90 per cent to the top-line, and if the new development is going to sustain, it will create a problem not only for us but for all players in the sector.”
The company is also planning to raise an additional Rs3,000 crore through a Qualified Institutional Placement (QIP) route, a move that could now be affected.
In response to the growing uncertainty, sources indicate that Kitex is likely to diversify its market away from the US to the European Union, the UK, and other countries. The company is also reportedly weighing the prospects of strengthening its presence in the domestic market.
These strategic pivots come at a critical time, as the company’s US subsidiary, Kitex USA LLC, has already been bleeding, with its net worth eroded after posting losses for the past several quarters.
