Kitex Garments surges 10% as Telegana government approves expansion plan

The company expects business to grow at a good pace and there are possibilities of getting new orders from existing/ new buyers from across globe in the backdrop of the US-China trade war

Shares of Kitex Garments hit the 10% upper circuit at Rs 164.10 on the BSE this morning after the company announced that Telegana government has approved its expansion plan.

“The proposal submitted by Kitex Garments before Government of Telegana towards expansion plan has been approved,” the company said in exchange filing. The Government order will be issued within a few days, it added.

The rationale behind expansion plan is ease of doing business, to utilize better logistics and infrastructural facilities; incentive & subsidy schemes from the Government, proximity to raw material sources; reduced cost of labour and its availability and overall of cost reduction and thereby increase in profitability in long run.

As of 09:30 am; a combined 210,000 equity shares had changed hands on the NSE and BSE. There were a combined pending buy orders for 420,000 shares, the exchanges data showed.

On July 13, 2021, Kitex Garments had said the company has agreed in principle to invest Rs 1,000 crore to set up apparel manufacturing facilities in the state of Telegana which will create 4,000 additional employment opportunities over the next 2 years. “With liberal government policy, availability of raw material and various incentives offered by the state, the company expects to reduce its operating cost, shorten payback period and drive profits,” the company had said.

However, the stock witnessed a decline thereafter and ended at Rs 149.20 on Wednesday (1 September), a price correction of 34 per cent from its 52-week high of Rs 224.45 touched on July 13, 2021.

Kitex Garments is in the business of manufacturing and exporting garments. The company manufactures different types of garments such as shirts, pants, jackets, innerwear and outerwear. The company also exports infant and children's wear and jackets to the United States.

“Since company is in Infants wear business, we expect that business will grow in good pace and there is also a possibility of getting new good order from existing/ new buyers from across globe considering trade war between US and China. We are continuously monitoring the current situation to grab the opportunities and also ready to face any challenges,” the management said in the financial year 2020-21 annual report.