Cost escalation for automating seamless movement of goods across units
KOCHI: Kitex Group’s Telangana project, initially conceived with an investment of Rs2,890 crore, is considered one of the largest projects ever undertaken by any business group in Kerala.
However, the project’s cost is set to increase by another Rs400 crore, taking the total cost to Rs3,290 crore. The group is in the process of setting up integrated textile units in Telanagana through two phases under Kitex Apparel Parks Ltd (KAPL).
The project is being funded by term loans from banks to the extent of 70 per cent of the project cost, with the remaining 30 per cent being contributed by the promoters of Kitex Garments Ltd (KGL), the parent company.
“The Rs400-crore cost escalation is due to an increase in the scope of the project towards automating seamless movement of goods across units through conveyors, addition of power sub-stations and other improvements,” a document released by ICRA rating agency noted.
First phase
The KAPL project’s first phase is likely to be completed by the end of March 2025 and the second phase by the end of 2026. While the first phase of the project was initially expected to be completed a year ahead of the scheduled date of commencement (SCOD), it failed to catch up with the targeted time frame owing to operational reasons.
“However, the entity now expects to commence spinning operations at its Warangal unit by September 2024,” the ICRA document said.
Politically motivated?
The decision to set up the prestigious capital-intensive KAPL project in Telangana has its due share of political reasons too.
The managing director of Kitex group, Sabu Jacob, who had accused Kerala government of targeting his group, was evaluating locations across several other states to invest.
The selection of Telangana was triggered after the government there dispatched a private jet to ferry the Kitex leadership led by Sabu Jacob from Kerala to Hyderabad, and showed sites near Warangal, which resulted in Kitex group swiftly entering into a MoU with the government there.
Leaving Kerala
Talking to businessbenchmark.news, another industrialist expressed his concern about more businessmen in Kerala developing cold feet about establishing projects within the state.
“While V-Guard, a leading business establishment in Kerala, has almost all its units operating from outside Kerala, there are businesses that are seriously weighing options of shifting their registered offices to elsewhere. I Know one leading jewellery group having already moved its registered office to Bangalore from Central Kerala,” he noted.
P Rajiv’s view
However, P Rajiv, the Kerala minister for Industries and Law, holds an altogether different view on this. He argues that not only entities from within the state, even multi-national companies (MNCs) like IBM, have started viewing Kerala as a preferred place to set up their ventures.
He said, of late, more such enquiries are flowing in and before long, “you can see a lot of new businesses establishing their presence in Kerala soon.”
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