Reasons for downward revision in credit rating

Kitex Garments Limited (CIN: L18101KL1992PLC006528) Regd Office: Building No. VI/496, Kizhakkambalam, Vilangu P.O, Aluva, Ernakulam – 683561, Kerala Phone: 91 484 2585000, Fax: 91 484 2680604 Email: sect@kitexgarments.com Website: www.kitexgarments.com Ref: KGL/SE/2026-27/AUG/06 August 28, 2026 BSE Limited National Stock Exchange of India Ltd 1st Floor, New Trading Ring, Exchange Plaza, 5th Floor, Rotunda Building, P J Towers, Plot No.C/1, G Block, Dalal Street, Fort Mumbai, Bandra - Kurla Complex, Bandra (E), Maharashtra – 400 001 Mumbai, Maharashtra – 400 051. Scrip Code : 521248 Scrip Symbol : KITEX Dear Sir/ Madam, Sub :- Disclosure of reasons for downward revision in credit rating Ref :- Intimation of Credit Ratings dated August 27, 2026 pursuant to Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 This is in continuation of our intimation dated August 27, 2026 regarding the revision in credit ratings assigned by India Ratings and Research Private Limited to the bank loan facilities of the Company aggregating to ₹3,479.80 million. In accordance with the applicable provisions of Regulation 30 read with Para A(3) of Part A of Schedule III of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, the Company hereby provides the reasons for the downward revision in the credit rating, as communicated by the Rating Agency . Reasons for downward revision in rating: “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 KAPL resulted in sharp deterioration in the consolidated credit metrics in FY26. Ind-Ra expects the net leverage (net debt/EBIDTA) to remain high from FY27, with gradual deleveraging in the medium term through term-loan repayments.” The above disclosure is being made to provide the reasons communicated by the Rating Agency for the downward revision in credit rating and is to be read in continuation of the Company's earlier intimation dated August 27, 2026. A copy of the detailed rating rationale is enclosed. Kitex Garments Limited (CIN: L18101KL1992PLC006528) Regd Office: Building No. VI/496, Kizhakkambalam, Vilangu P.O, Aluva, Ernakulam – 683561, Kerala Phone: 91 484 2585000, Fax: 91 484 2680604 Email: sect@kitexgarments.com Website: www.kitexgarments.com Kindly take the above information on records. Thanking you, Yours sincerely, For Kitex Garments Limited Dayana Joseph Company Secretary & Compliance Officer Enclosed: As above Title India Ratings Downgrades Kitex Garments’ Bank Loan Facilities to ‘IND BBB+’/Negative/‘IND A2’ Brief India Ratings and Research (Ind-Ra) has downgraded Kitex Garments Ltd’s (KGL) bank loan facilities’ long-term rating to ‘IND BBB+’ from ‘IND A’ with a Stable Outlook and short-term rating to ‘IND A2’ from ‘IND A1’ as follows: Details of Instruments Instrument Regulator of Date of Coupon Maturity Size of Rating Assigned along Rating Description Instrument Issuance Rate (%) Date Issue with Watch/Outlook Action (INR million) Bank loan RBI - - - 3,479.8 IND Downgraded facilities BBB+/Negative/IND Analytical Approach Ind-Ra continues to take a fully consolidated view of KGL, a group company, Kitex Childrenswear Limited (KCL; ‘IND BBB+’/Negative/’IND A2’), and KGL’s subsidiary, Kitex Apparel Parks Limited (KAPL; KGL holds a 70% stake and KCL 30%; ‘IND BBB‘/Negative/’IND A3+’), jointly known as the Kitex Group, while arriving at the ratings, as these entities operate under the same management and have strong financial linkages. Detailed Rationale of the Rating Action 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 KAPL resulted in sharp deterioration in the consolidated credit metrics in FY26. Ind-Ra expects the net leverage (net debt/EBIDTA) 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. The FY26 numbers are provisional. List of Key Rating Drivers Strengths • Strong business profile; operationalisation of Warangal unit • Strong product profile; subdued margins in FY26 due to demand headwinds Weaknesses • Elevated credit metrics due to profitability dip • High customer and geographical concentration • Raw material price volatility; forex risk Detailed Description of Key Rating Drivers Strong Business Profile; Operationalisation of Warangal Unit: The Kitex Group has an operational track record of over three decades and is one of the leading exporters of infant garments in India. The company has established relationships with large, reputed international retailers, such as William Carter, Gerber, and The Children's Place LLC, leading to repeat orders. Furthermore, the group has recently added and is in the process of onboarding new major buyers from the European and Australian markets, including Hennes & Mauritz, providing medium-term revenue visibility in non-US markets. The newly established Warangal unit with a capacity of 160.35 million pieces under KAPL commenced operations on 15 September 2025, providing low-cost labour and easy availability of the key raw material (raw cotton). Warangal unit’s capacity utilisation is likely to improve from FY27, which was adversely impacted in FY26 due to the unfavorable global situation. Additionally, to mitigate the demand risk, Sitarampur project’s capex has been put on hold, mainly due to geopolitical uncertainties and the need to stabilise the Warangal unit. The Warangal facility shall largely cater to demand from new geographically diversified client base and the group’s existing customers, providing a fair revenue visibility for the incremental capacities. Strong Product Profile; Subdued Margins in FY26 due to Demand Headwinds: The Kitex Group operates in the infant garments segment, which is a niche market in the textile industry. Infant garments require more focus on product quality and are highly customised, resulting in high value addition, and hence, healthy operating margins. Furthermore, the demand for these products is less affected by industry downturns compared to that for adult garments, as it is r [Showing first 8,000 characters — download PDF for full document]