On June 29, Kitex Group, the largest private-sector employer in Kerala, announced the withdrawal of an Rs.3,500 crore investment project from the state. Kitex Group alleged that the state authorities are running a witch-hunt against the company. Notably, Kitex Garments is the second-largest kids’ apparel manufacturer in the world.
The company has announced that it is scrapping the planned projects to open an apparel park in Kochi and establish industry parks at Thiruvananthapuram, Kochi and Palakkad. The memorandum of understanding for the said project was signed with the Kerala government at the ‘Ascend Global Investors Meet’ in Kochi in January 2020. The company was to invest Rs 3,500 in these projects.
Sabu M Jacob, chairman and managing director of Kitex group, said that the company has already acquired 30 acres of land for the apparel park at Kizhakkambalam in Kochi. If completed, the project would have provided jobs to over 20,000 people. The three industrial parks that were supposed to be established in the state would have promoted start-ups by providing them with all infrastructural facilities. Each of these parks would have had the potential to generate over 5,000 direct job opportunities.
Jacob added, “The decision to scrap the project has been taken as I am fed up with the continuous harassment at the hands of the authorities. Whoever invests in Kerala will lose peace of mind and will be driven to suicide.” He further stated that 11 teams of officers from various departments raided the company in the last month, including teams from the Department of labour, factories and boilers, and even a team led by the district collector.
He said, “On Tuesday, it was the turn of the pollution control board. Each team has 40 to 50 officers and searches every nook and corner of the company. They grill employees for hours but do not reveal what violations they have found. The Kitex factory has been functioning here for the past 26 years, and we have 11,000 employees. They arrive with a huge team violating Covid protocols and bring camera teams of online media.”
While calling out the Kerala government for a non-business-friendly environment in the state, he said, “While our neighbouring states give a red carpet welcome to investors, the Kerala government treats them as traitors. They are branded as bourgeoisie, exploiters, encroachers, capitalists and criminals and humiliated in public.”
Sabu further added that the other states also provide additional facilities like free land, water, power, tax holiday to investors, which are not provided by the Kerala govt. He said, “There are states that provide the PF and ESI share of the employees. Some states even offer Rs 5,000 salary for the employees for five years. We don’t demand any benefits from the government. At least they can stop harassing us. If the situation continues, Kerala will turn into a graveyard of industries.”
Kitex’s shares plunged after the announcement
The announcement had an adverse effect on the share price of Kitex Group. The share price went down by 10% in the initial hours but recovered a bit later in the day. The share price at NSE reached Rs 111.35 earlier in the day, compared to the closing price of Rs 124.80 yesterday. The stock ended at Rs 114.05 today, marking a decline of around 8%.
Another reason for the fall in the share price was its Q4 results. The reported a 49.3% decline in net profit of Rs 9.73 crore in January-March 2021 quarter, as against a net profit of Rs 19.22 crore in the same quarter previous year. For the full financial year 2020-21, the net profit of the company fell 45% to Rs 59.9 crore, against Rs 108.67 crore in the previous financial year.
Kerala ranks 28th in Ease of Doing Business
Out of 29 states, Kerala ranks 28th in Ease of Doing Business. Jacob said, “The only other state lagging behind Kerala in Tripura and it is evident from this fact that how far Kerala is business-friendly. States which had been traditionally lagging behind, like Uttar Pradesh, Assam, Orissa and Jharkhand, had improved their rankings. UP which was far behind in the rankings, has come to the second place, emerging as a hot destination for investors.”
He further added that during the 1970s and 1980s, trade unions killed the industries in the state. However, now it is the pseudo-environmentalists, bureaucrats and politicians who do not want the projects to flourish in the state. “They will try to scare away those who won’t yield to their interests,” he said.