KG Denim Q3 Loss Hits ₹413 Lakhs Amid CFO Resignation

Introduction

KG Denim Limited has disclosed its unaudited financial results for the third quarter of fiscal year 2026, revealing a significant net loss of ₹413 lakhs. This marks a stark downturn from the ₹187 lakhs profit reported in the preceding quarter. Compounding the company's financial difficulties, Chief Financial Officer (CFO) Mrs. Ramaprabha S has resigned from her position, effective February 13, 2026. These developments highlight the persistent operational and financial headwinds facing the textile manufacturer.

Q3 Financial Performance Breakdown

The company's performance in the quarter ending December 31, 2025, presented a mixed picture. While revenue from operations saw a sequential increase to ₹338 lakhs from ₹187 lakhs in Q2FY26, profitability deteriorated sharply. A significant contributor to the total income of ₹812 lakhs was 'Other Income' of ₹474 lakhs, which included a one-time profit of ₹759.04 lakhs from the sale of non-core assets. Without this sale, the operational loss would have been substantially higher. The net loss for the quarter stood at ₹413 lakhs, translating to a basic and diluted Earnings Per Share (EPS) of ₹(1.61).

Nine-Month Performance Analysis

For the nine-month period ending December 31, 2025, KG Denim's financial health remained under pressure. The company reported a cumulative net loss of ₹550 lakhs on revenue from operations of ₹2,404 lakhs. This compares to a net loss of ₹2,382 lakhs on revenue of ₹4,674 lakhs in the same period of the previous fiscal year. While the loss has narrowed year-on-year, the significant drop in revenue underscores the ongoing challenges in its core business operations.

Segment-wise Results

The company's operations are divided into two primary segments: Textiles and Power. In Q3FY26, the Textiles segment generated revenue of ₹812 lakhs and a segment result (profit) of ₹354 lakhs. In contrast, the Power segment reported no revenue and incurred a segment loss of ₹261 lakhs, indicating a complete halt in its power generation activities during the quarter. This reliance on a single operational segment adds to the company's vulnerability.

Key Leadership Change

In a significant corporate development announced alongside the financial results, CFO Mrs. Ramaprabha S tendered her resignation, citing personal reasons. Her departure, effective February 13, 2026, comes at a critical time for the company as it navigates complex financial restructuring and creditor negotiations. The board accepted her resignation during the meeting held to approve the quarterly results. The search for a successor will be a key priority for the management team.

Financial Stress and Creditor Issues

KG Denim continues to grapple with severe financial constraints. As of December 31, 2025, the company's balance sheet showed outstanding trade payables amounting to a substantial ₹7,884.41 lakhs. Several creditors have initiated recovery proceedings, with notices issued for an aggregate amount of ₹913.54 lakhs. The company has managed to reach amicable settlement arrangements for a portion of this, totaling ₹382.80 lakhs, but a significant liability remains.

Debt Restructuring Hurdles

The company has been working to stabilize its finances through a restructuring package approved by the State Level Banker's Committee under RBI guidelines for natural calamities. However, the implementation has not been smooth. The South Indian Bank Limited, which holds 7% of the debt exposure, and one Non-Banking Financial Company (NBFC) with dues of ₹6.50 crore have dissented from the approved scheme. This dispute is currently pending before the RBI Ombudsman, adding uncertainty to the company's debt resolution process.

Balance Sheet and Market Position

The cumulative impact of sustained losses has eroded the company's equity base, resulting in a negative net worth of ₹147.34 lakhs as of December 31, 2025. This is a critical indicator of financial distress. The company's stock performance reflects these challenges, with negative returns over the past year (-28.56%) and five years (-43.96%), indicating a significant loss of investor confidence over the long term.

Conclusion

KG Denim's Q3FY26 results paint a picture of a company facing deep-seated challenges. While the sale of assets provided a temporary boost to income, the core operations remain unprofitable. The resignation of the CFO during this turbulent period adds another layer of uncertainty. The path forward depends heavily on the successful resolution of its debt restructuring plan and its ability to manage creditor pressure while reviving its core textile business. Stakeholders will be closely watching for updates on the pending RBI Ombudsman case and the appointment of new financial leadership.