KOCHI: The auditors of Kitex Garments Ltd (KGL) have yet again raised concerns about the financial health of its US joint venture, Kitex USA.
Kitex USA, in which Kitex Garments owns a 50 per cent stake, has been struggling financially ever since the COVID pandemic gripped the world, pushing thousands of businesses into intractable financial difficulties
Investment in Kitex USA
Kitex Garments holds an investment amounting to Rs27.76 crore in Kitex USA as on June 30, 2024. But the US joint venture has been reporting continuous losses and this has fully eroded its net worth.
But the management of Kitex Garments is hopeful about the turnaround of its US Associate and believes that the Fair Value of its investment in the US Associate is intact.
“The management has assessed and evaluated the fair valuation of the investments through different methods. It has considered various supporting factors to prove its point,” the company statement noted.
Fair Value intact
The management has presented various turnaround strategies like change in its business plan itself in order to cater to the new business deals being finalised with major customers, who are leaders in the market.
The Kitex management has stated that its US Associate has already started shipping test orders to the targeted customers for their distribution to selected stores.
Management confident
The management strongly argues that the fair value of the investment in the US Associate is higher than the carrying value as on June 30, 2024, an argument the auditors prefer to differ.
The Kitex management is confident that no material adjustments would be required to be made to the carrying value of the investments in the Associate in the financial results of the company for the quarter ended June 30, 2024.
Company’s view
Talking to businessbenchmark.news two months ago, following the announcement of the fourth quarter results of FY24, the chief financial officer (CFO) of the parent company, Boby Michael had explained that the company has tied up with big names such as Lat Apparel and Sam’s Club.
Moreover, a direct placement deal has already been signed with Walmart, which is expected to not only shore up sales but even the profitability.
“We hope to close the current financial year 2024-25 (FY25) for Kitex USA with a sales turnover of $30 million to $35 million, and the trend if sustained for the next two to three years, will help the group pull out Kitex USA from all its financial ailments,” added Michael.
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