Gokak Textiles to sell knitwear unit for ₹19.5 cr

Key development from the board meeting

Gokak Textiles Limited has approved the permanent closure of its knitwear unit located at Bagalkot Road, Village Marihal, in Belagavi district of Karnataka. The decision was taken at the company’s board meeting held on August 11, 2026. The company also approved the subsequent sale of the unit’s land, building, and machinery, subject to statutory, regulatory, and labour approvals. Management cited years of declining performance and a sustained lack of viability in the knitwear business. The unit is proposed to be sold on an “as is where is” basis to M/s V. G. Parekh & Co. for a total consideration of ₹19.50 crore. The company has indicated the closure and sale are expected to be completed by October 2026.

Q1FY27 result: losses narrowed, but concerns remain

For the quarter ended June 30, 2026 (Q1FY27), Gokak Textiles reported a standalone net loss of ₹4.0131 crore, compared with a standalone net loss of ₹11.4565 crore in the same quarter last year. Separately, the company reported a consolidated net loss of ₹4.40 crore for the quarter ended June 30, 2026. Consolidated revenue from operations for the quarter stood at ₹25.39 crore. The company’s auditors also highlighted a material uncertainty over the company’s ability to continue as a going concern, as reported alongside the quarterly numbers. The knitwear unit closure was positioned as a step to reduce operational drag from an underperforming division.

What Gokak Textiles makes and where it operates

Gokak Textiles’ principal activity is manufacturing and distribution of textile products. Its product range includes yarn, blended yarn, cotton canvas, fabric, terry towel, knitted garments, and other related products. The company has two operational units referenced in its disclosures: a spinning mill at Gokak Falls in Karnataka and a garment-manufacturing unit in Belgaum district. The Belgaum unit has been described as specialising in readymade knitted garments such as combed polo shirts and T-shirts for export markets. Over time, however, the knitwear operations at Marihal became a weak link in the company’s operating structure.

Why the Marihal knitwear unit is being closed

The Marihal knitwear unit was established in 1995 and operates on 15.65 acres of freehold land. The company said performance in the knitwear business declined over several years. Reasons cited for the closure include structural cost disadvantages, operational unviability, adverse textile industry conditions, machinery obsolescence, and industrial relations issues. The company also cited electricity and water supply challenges, along with environmental and regulatory restrictions. These factors, taken together, were presented as persistent and structural rather than temporary. The board’s decision frames the closure as a necessary step to stop further strain from a loss-making division.

Asset sale terms: ₹19.50 crore deal, advance already received

Gokak Textiles said it had entered into a sale agreement on September 9, 2025, with M/s V. G. Parekh & Co. for ₹19.50 crore. The agreement covers land, buildings, and machinery related to the knitwear unit. An advance of ₹9.50 crore has already been received. The company also disclosed that the completion of the sale was postponed earlier due to process delays. In one update, the sale was described as being delayed by three months from an earlier expected completion timeline, and in another, completion was stated to have been postponed by six months. The latest stated expectation is that the sale and closure process will be completed by October 2026, subject to approvals.

Knitwear unit’s financial contribution and balance sheet drag

In FY26, the knitwear business contributed revenue of ₹4.2273 crore, or 9.76% of the company’s total revenue from operations. The company also disclosed that the knitwear business carried a negative net worth of ₹41.9255 crore as of March 31, 2026. This combination of modest revenue share and significant negative net worth was cited as part of the rationale for shutting the unit. The company also provided a comparison point from FY25: the knitwear unit generated turnover of ₹5.0547 crore, and this was stated as 5.17% of revenue in that year. The disclosures show the unit remained a relatively small contributor to turnover while continuing to weigh on overall financial health.

Operational changes already made before the closure decision

The Marihal unit was primarily geared towards exports, while also serving the local market. The company disclosed that specialised garmenting machinery, including fabric dyeing and knitting equipment, had been relocated to the company’s Mills Division at Gokak Falls in FY 2015-16. Following that relocation, the Marihal site retained only cutting and stitching facilities. This detail matters because it suggests the unit’s capability and asset base had already been reduced years before the closure decision. The remaining operations, combined with cited cost disadvantages and obsolescence, likely limited the unit’s ability to compete effectively. The closure decision, therefore, follows a period of operational scaling down.

What happens next: approvals, compliance, and timelines

The closure is subject to statutory, regulatory, and labour approvals. The company has also stated it will comply with the requirements of Regulation 37A of the LODR Regulations before selling the unit. Once approvals are in place, the company expects to complete the disposal of the land, building, and machinery by October 2026. The unit is to be sold on an “as is where is” basis, indicating the buyer will acquire the assets in their existing condition. Until the process is completed, the company will remain exposed to execution timelines and procedural requirements that it has already flagged as sources of delay.

Key facts at a glance

Market impact and what investors should track

The immediate impact is operational: a loss-making, unviable unit is being shut, and the company is pursuing asset monetisation through a ₹19.50 crore sale. The disclosures also put attention on the auditors’ note of material uncertainty about going concern, which is a key risk marker for investors tracking the company’s financial position. The knitwear unit’s negative net worth and cited operational constraints help explain why the board chose a permanent closure rather than a turnaround effort. Over the next few quarters, the main monitorables will be the completion of statutory and labour approvals, the final closure date, and whether the sale proceeds are received as scheduled.

Conclusion

Gokak Textiles’ August 11, 2026 board decision ties together two themes in its recent updates: narrowing quarterly losses and a push to remove structural underperformance from its knitwear business. The company is targeting October 2026 for completion of the Marihal unit’s closure and its ₹19.50 crore sale to M/s V. G. Parekh & Co., subject to approvals and compliance requirements. Investors will likely watch execution on the sale timeline and subsequent disclosures on how the company deploys the proceeds and manages ongoing business risks flagged by auditors.