India Ratings and Research downgrades ratings of Kitex Garments to 'BBB+/A2'

The agency has also downgraded the company's short-term rating to ?IND A2? from ?IND A1?.

India Ratings and Research stated that the rating downgrade reflects a significant dip in the group?s profitability with subdued margins in FY26, mainly due to the partial absorption of US tariff-related costs, a slower-than-expected ramp-up in the Warangal unit, and delays in the execution of orders.

This along with the impact of the recently completed large debt-funded capex for Kitex Apparel Parks (KAPL) resulted in sharp deterioration in the consolidated credit metrics in FY26. India Ratings expects the net leverage to remain high from FY27, with gradual deleveraging in the medium term through term-loan repayments.

The 'negative' outlook reflects a likely delay in the ramp-up at the new Warangal (Telangana) facility, primarily due to the group?s geographical concentration of clientele in the US amid the high tariff imposition on India.

The ratings reflect the Kitex Group?s leading position in the infant garment export business and strong clientele. Also, the group?s scale of operations is likely to improve gradually as the Warangal unit commenced operations on 15 September 2025.

The construction of the Sitarampur unit, under KAPL, has been deferred, due to the need to stabilise operations at the Warangal unit, coupled with geopolitical uncertainties leading to demand headwinds in export markets.

The group has initiated geographical diversification in the European and Australian markets and has already onboarded marquee clients such as Hennes & Mauritz, as a majority of the group?s clientele is concentrated in the US.

The agency expects the group?s EBITDA margins to improve from FY28, supported by a more diversified export client base along with the group?s improving domestic presence, leading to the gradual ramp-up of operations at the Warangal unit. The group?s ability to diversify its client base and ramp-up operations at the Warangal facility is a key rating monitorable.

However, the ratings are constrained by the group?s exposure to raw material price volatility and forex risk.

Kitex Garments is flagship company of the Kitex Group. The company manufactures infantwear garments with an installed capacity of 129.60 million pieces at its Kizhakkambalam unit in Kochi, Kerala.

Powered by Capital Market - Live News