Kallam Textiles Faces Insolvency Petition From Union Bank

Kallam Textiles Under Financial Scrutiny

Kallam Textiles Limited, a textile manufacturer based in Andhra Pradesh, is confronting a significant legal challenge that puts its financial stability under a microscope. The company has officially disclosed to the Bombay Stock Exchange (BSE) that Union Bank of India has initiated insolvency proceedings against it. The petition was filed at the National Company Law Tribunal (NCLT), Amaravati Bench, marking a critical development for the company and its stakeholders. This action follows a history of financial difficulties, indicating deepening troubles for the textile firm.

Details of the Insolvency Petition

The company confirmed receiving the intimation from the NCLT on February 11, 2026. The filing by a major public sector bank like Union Bank of India signals a serious attempt to recover outstanding dues through the legal framework of the Insolvency and Bankruptcy Code (IBC), 2016. The key details of the petition are summarized below.

In line with regulatory requirements, Kallam Textiles made the disclosure under Regulation 30 of the SEBI Listing Regulations. The company has assured that it will provide timely updates on the progress of the legal proceedings.

A History of Financial Strain

This insolvency petition is not an isolated event but rather the culmination of prolonged financial distress. Public records reveal that Kallam Textiles has been under pressure from its lenders for some time. Previously, Union Bank of India had issued public notices for the e-auction of the company's assets, including its spinning and hydel units, in an attempt to recover dues amounting to approximately Rs. 185.35 crore. This action was taken under the SARFAESI Act, which allows banks to auction properties to recover debts.

Adding to its woes, Kallam Textiles has also been contesting a separate debt recovery case filed by Indian Bank. This case involves an outstanding amount of Rs. 141.93 crore. While the company secured an interim stay from the Andhra Pradesh High Court in that matter, the persistent legal actions from multiple lenders underscore a pattern of significant financial instability and difficulty in meeting debt obligations.

Financial Health Under Pressure

A review of the company's recent financial statements reveals clear signs of stress. The balance sheet data shows a deteriorating financial position over the last year, making it vulnerable to creditor actions.

The data highlights a 2.60% decline in total assets, coupled with a substantial 29.27% increase in current liabilities. This growing gap suggests increasing difficulty in meeting short-term obligations. Furthermore, a 28.68% erosion in shareholders' capital points to diminishing value for equity holders.

Understanding the Insolvency Process

If the NCLT admits the petition filed by Union Bank, it will initiate a Corporate Insolvency Resolution Process (CIRP). The primary goal of the CIRP is to find a way to revive the company. Once initiated, a moratorium is declared, which halts all other legal proceedings against the company, providing it with breathing room. An Interim Resolution Professional (IRP) is appointed to take over the management of the company from the existing board. The IRP's role is to manage the company's affairs and invite resolution plans from potential buyers or investors. If a viable resolution plan is approved by the Committee of Creditors and the NCLT, the company can continue its operations under new management or a restructured framework. However, if no suitable plan emerges within the stipulated timeline, the company is pushed into liquidation, where its assets are sold off to repay creditors.

Risks and Outlook for Investors

The initiation of insolvency proceedings poses a significant risk to all stakeholders, particularly shareholders. The company's stock performance already reflects investor concerns, with negative returns over the one-year and five-year periods. The five-year return stands at a stark -69.47%, indicating a massive erosion of wealth. If the company enters CIRP, equity shareholders are typically last in the priority list for repayment, and in many cases, their investment value is completely wiped out. The immediate future of Kallam Textiles hinges on the outcome of the NCLT hearing. Investors will need to closely monitor the company's disclosures for any material developments.

Conclusion

The insolvency petition filed by Union Bank of India places Kallam Textiles Limited at a critical crossroads. Faced with mounting debt, declining financial health, and a history of creditor actions, the company's ability to negotiate a resolution or defend its position in court will determine its survival. The upcoming NCLT proceedings will be a deciding factor in whether the company can be restructured or if it is headed towards liquidation.