NCLT Kochi Allows Kitex Group Companies To Proceed With Proposed Demerger

The National Company Law Tribunal (NCLT) at Kochi has cleared the first procedural step in a proposed demerger between the Kitex group. A business undertaking of Kitex Childrenswear Limited is proposed to be transferred to the listed company Kitex Garments Limited. The tribunal has dispensed with several shareholder and creditor meetings while directing votes by public shareholders and unsecured creditors.

Part of the Kitex group, Kitex Garments Limited is a Kerala-based exporter of children's and infant apparel, with a history of manufacturing other garments, including lungis.

A coram of Judicial Member Vinay Goel was considering a joint application under the Companies Act, 2013, for a scheme of arrangement in the nature of a demerger, with April 1, 2025, as the appointed date.

Kitex Childrenswear Limited is an unlisted public limited company, while Kitex Garments Limited is a listed public limited company whose shares are listed on the Bombay Stock Exchange and the National Stock Exchange. Kitex Childrenswear Limited is engaged in the manufacture, sale, import, and export of textile products, including yarn, fabrics, and garments made from natural and synthetic fibers, while Kitex Garments Limited carries on the business of manufacturing, trading, importing, and exporting all kinds of textile items. The board of directors of both companies unanimously approved the scheme of demerger in February 2025.

The companies told the tribunal that the proposed scheme would not affect the rights or interests of their creditors. They also said that all secured creditors of both companies, as well as all equity shareholders, had given their consent.

Taking note of these consent affidavits, the tribunal dispensed with the meetings of equity shareholders and secured creditors of Kitex Childrenswear and the meeting of secured creditors of Kitex Garments. However, it directed that meetings of unsecured creditors and equity shareholders, where required, must be held in accordance with law.

The tribunal accordingly allowed the application and issued directions for convening the meetings. It appointed former NCLT Judicial Member Kuldip Kumar Kareer as the chairman and Rajmohan R as the scrutinizer. It also directed the issuance of statutory notices and compliance with procedural requirements, clearing the way for the companies to move the second motion seeking sanction of the scheme.