Shares of Kitex Garments rallied over 17% after the textile maker reported a net profit of ₹13.70 crore for the September quarter. While revenue climbed 66%, investors should note that auditors have raised concerns regarding the recoverability of a ₹27.76 crore investment in the company’s US subsidiary.
Shares of Kitex Garments saw a sharp upward move on Tuesday, rising over 17% after the company declared its financial results for the second quarter of the fiscal year 2026-27. The textile manufacturer reported a consolidated net profit of ₹13.70 crore, a significant shift from the losses seen in previous quarters. This positive performance caught the attention of investors, as the company had reported a loss of ₹6.21 crore in the same period a year ago and a loss of ₹17.12 crore in the June quarter.
The recovery was supported by a strong jump in business activity, with revenue from operations climbing 66% to reach ₹203.03 crore compared to the previous year. Operating profit, or EBITDA, also swung into positive territory at ₹44.98 crore, a stark improvement from the negative EBITDA of ₹15.95 crore reported in the same period last year. Despite this rally, the stock price remains well below its 52-week peak of ₹231.15 recorded in February 2026.
Auditor Flagged Investment Risks
While the return to profitability provides some relief, investors should also pay attention to a specific red flag raised by the company's auditors. In the latest exchange filings, the auditors qualified the standalone financial results, specifically questioning an investment of ₹27.76 crore in Kitex USA LLC. The auditors stated that they could not find sufficient evidence to prove that this money is recoverable. This concern stems from the fact that the US subsidiary has been incurring losses and has seen its net worth erode. For investors, this creates uncertainty about the value of this asset on the company’s balance sheet.
Furthermore, while the September quarter was profitable, the company still reported a loss for the full half-year period. This suggests that the road to consistent profitability may remain challenging. The company is currently working on significant expansion plans in Telangana, and the success of these projects remains a critical factor for long-term growth.
Key Monitorables for Investors
Moving forward, the primary areas for shareholders to track include the sustainability of this profit. A single profitable quarter does not guarantee a long-term turnaround, especially given the ongoing volatility in export demand. Investors may also watch for further clarity or resolution regarding the auditor's concerns about the US subsidiary. Finally, the speed and efficiency with which the company executes its large-scale expansion plans in Telangana will be vital, as any delays could lead to cost pressures and impact the company's cash flow.