Kerala High Court Issues Notice to SEBI and Kitex Garments Over Alleged Financial Irregularities — September 26, 2026

The Kerala High Court has issued a formal notice to the Securities and Exchange Board of India (SEBI) and the management of Kitex Garments Limited (KGL) following a petition seeking a regulatory investigation into alleged financial and corporate governance irregularities across the group.

A single bench presided over by Justice Bechu Kurian Thomas issued notices to SEBI, listed entity Kitex Garments Limited, and unlisted promoter entity Kitex Childrenswear Limited (KCL).

Allegations of Structural Irregularities

The writ petition was filed by Muhammed Firdouz, who had previously submitted a formal complaint before SEBI flagging concerns over the statutory disclosures and transactions of Kitex Garments. The petitioner moved the High Court alleging that the market regulator had not taken adequate action on the representations made regarding the group's financial conduct.

According to the petition, an examination of the group's public filings, annual reports, and financial statements across successive financial years revealed major structural anomalies, unbusinesslike foreign transactions, and non-compliance with statutory disclosure frameworks.

The focus of the allegations centers around Kitex USA LLC (KUL), a joint venture incorporated in the United States in which KGL and KCL hold equal 50% equity participation.

Key Financial Discrepancies Highlighted in the Plea:

• Export Transactions: Accumulated export transactions between listed firm KGL and joint venture entity KUL aggregating to approximately Rs 1,838.03 crore.
• Prolonged Receivables: Substantial outstanding export receivables owed by KUL over extended durations.
• Commission Payments: Commission disbursements amounting to approximately Rs 46.98 crore routed from KCL to KUL.
• Disclosure Shifts and Realisations: Unexplained changes in the classification and manner of reporting related-party transactions, alongside subsequent delayed realisations totaling roughly Rs 94.86 crore from KUL.

Implications for Market Participants

Headquartered in Kizhakkambalam, Kerala, Kitex Garments is one of India's prominent manufacturers and exporters of infant and children's apparel, with major revenue streams tied to global retail markets, particularly the United States. The listed entity trades on both the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE).

The petition contends that the financial dealings and disclosure patterns between the Indian parent entities and the overseas joint venture raise potential corporate governance and related-party non-compliance issues under SEBI's Listing Obligations and Disclosure Requirements (LODR) Regulations.

The High Court's directive requires SEBI and the respondent Kitex entities to place their responses on record regarding the issues raised in the petition. Any subsequent regulatory scrutiny by SEBI could have implications for public shareholders and ongoing structural reorganisations within the Kitex Group.

Tags: Kitex Garments SEBI Kerala High Court Kitex Childrenswear BSE NSE