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G. Gurumurthy

Tirupur , Sept. 19

IF the knitwear exporters penchant is to have a low-cost funding for their operations, they seem to be closer to it now than ever before.

Nethaji Apparel Park (NAP), the special purpose vehicle company promoting Tirupur's exclusive knitwear park through the Union Textile Ministry's sponsored programme, has hit the bull's eye in accessing cheaper term-loan package. The SPV has tied up with the State Bank of India, which would extend around Rs 125 crore term lending for plant and machinery for the first batch of 54 garment units coming up in the 165-acre special apparel park.

These units largely promoted by the existing top-rung exporters in textiles/garments either as capacity expansion projects or as forward-integration to their existing production facility have been offered the term loan at the rate of 9.75 per cent to be spent on new building and machinery. But what makes this loan arrangement attractive for the promoters is that these term lending coming under the textile technology upgradation fund (TUF) scheme mode, they stand to get the 5 per cent interest rebate from the Centre which will enable these garment units to peg their final interest outgo on these new borrowings at 4.75 per cent, almost staking the competitive international lending rate.

"Since the availment of foreign currency loan coming with the exchange risk (and hence would require forward cover) would deprive reaping full benefit of the TUFS' 5 per cent rate discount, we opted for the rupee loan which we can as well use for investing on the machinery," said Mr A. Sakthivel, Chairman and Managing Director, NAP.

The factory site distribution inside the park will be on a two-tier basis. While there will be 46 factory-units to be set up on 1.8 acres site each, the bigger units numbering eight will be housed in 3.6 acre site each. The land available for the former would enable these units to have 20,000 sq ft factory area in the ground-floor with facility for vertical expansion to the extent of another 40,000 sq ft.

In the case of 3.6 acre-site factories, they will have a ground-floor area of 40,000 sq ft and can vertically expand up to 80,000 sq ft subsequently. The promoters have laid out the NAP design and its basic infrastructure inside the proposed park in such a way that it would meet international standards prescribed for garment units, which are expected to have minimum factory size of 20,000 sq ft.

The NAP-SBI project finance tie-up would enable funding up to Rs 2 crore each for the 46 factory-units and up to Rs 4 crore for the 8 larger units.

Mr Sakthivel, who is also the President of the Tirupur Exporters Association, said that the work on NAP has commenced andwould be completed within the next 12/14 months. The first set of units inside the park would begin operation by October 2004.

The NAP would have 24-hour water supply/privately run captive power facility, common marketing/exhibition hall for 10,000 sq ft and another 10,000 sq ft area for a labour recreation centre. The estimated initial investment of up to Rs 200 crore into the production facilities to be created at NAP by the promoters collectively, these investments would be largely in the area of dry production processes such as knitting/fabrication, embroidering or finishing/garmenting.

The SPV company has already awarded the work contract relating to basic infrastructure such as roads, buildings of factory units had been given to the Erode-based PRC Constructions. Similarly, the contract for setting up the two captive power generation units of 1.2 MW and 0.5 MW has been given to Japanese power company, Dahatsu which will commission and maintain the plants, added Mr Sakthivel.

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