G. Gurumurthy

An automated garment production line of SP Apparels at Neelambur near Coimbatore. — K. Ananthan

Coimbatore , Nov. 16

S.P. APPARELS, the knitwear manufacturing and exporting company in Avinashi near Coimbatore, is on an expansion mode with plans to venture into woven garmenting, including brand acquisition and garment retailing.

The company is in the process of chalking out a Rs 200-crore expansion plan that envisages backward integration of its knitted garment manufacture with its own dyeing facility, and strengthening its knitting, printing and garment units.

The capital spend may include woven garment factory acquisition of a domestic brand and connected production re-engineering.

The one-and-half-decade old garment export house is currently focussed on knitted garment exports to European garment labels with an annual export merchandising of 250-300 million pieces. At a 20-per cent growth, the company is looking at expanding its export to the US market.

"With opportunities to enlarge garment shipment to the high volume US market and the need to reduce the lead time in our production process, we have proposed to go for backward integration and creating our own dyeing facility for knitted garment production. At the same time, our existing buyers and customers want us to supply them woven garments as well. Hence, the need to diversify into woven garment making too," said Mr P. Sundar Rajan, Chief Executive Officer of S.P. Apparels.

A strong player in finished knitted garmenting, SP Apparels has a combined production area of 6.75 lakh sq ft split between three factories in Avanashi, Thekkalur and Neelambur, all located along the national highway no. 47. With automated garment making facilities and work practices conforming to fair production standards (it is in the process of achieving WRAP (worldwide responsible apparel production) norms), the garment company has knitting, embroidery and printing units besides modern garment production platforms that have 1,500 sewing machines. It has also leased additional sewing capacity to the extent of 500 machines. The garment output is one lakh pieces a day and this volume is expected to go up to 1,50,000 pieces after completion of expansion, by 2006-07.

The company's sales turnover in 2004/05 was Rs 170 crore, and its current year sales is likely to be around Rs 210 crore.

S.P. Apparels' new dyeing plant at the Perundurai SIPCOT industrial estate costing Rs 40 crore is set to process 12 tonnes a day initially. With civil construction work almost complete, the Perundurai processing unit is likely to start commercial operation by March 2006.

Around 60 knitting machines will be added to the current strength of 22 in about six months. The embroidery (from 27 to 50 machines) and printing units (from three to eight machines) are also expected to be expanded.

The total new investment for this will be another Rs 40 crore. The company's capacity building plan includes setting up a 25,000-spindle spinning unit at a cost of Rs 50 crore, which will ensure quality yarn supply for captive consumption.

"We are toying with the idea of getting into the domestic market for both knitted and woven garments. To realise this, we feel we should look for a domestic apparel brand and retailing outlets that can be leveraged effectively especially in the woven segment such as shirting, trousers and ladies blouses," said Mr Sundar Rajan.

While part of the Rs 200-crore funding needed for expansion could be met through term loans being tied with banks under the technology up-gradation fund scheme, S.P. Apparels is also weighing the options in accessing capital market, possibly through an initial public offering. The company officials are in talks with merchant bankers/financial consultants on evolving the mode of equity funding suitable to its structure including the size of the equity. The overall size of the equity being considered by the company will be Rs 100-120 crore.

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