The Hindu Business Line : S P Apparels bucks rupee impact, sustains export growth

Gearing up
Sees Re-$ debacle as opportunity to strengthen product line, manufacturing set-up
Despite 14% slide in realisation, set to achieve 10% growth for this year.

G. Gurumurthy

Coimbatore, Nov. 25 Integrated apparel exporting company S P Apparels feels that notwithstanding the price pressures caused by the rising rupee, approach towards fusing the gaps in wastage minimisation and cost cutting in operations has helped it sustain its export growth.

Minimising wastage in garment production and increasing labour productivity are among the tools the company has begun to adopt to overcome the price compression witnessed in the wake of the declining dollar value in the past six months.

According to Mr Sundar Rajan, Managing Director of S P Apparels, the bane of India’s garment units is the low labour productivity vis-À-vis those in China or even Sri Lanka.

Productivity concerns

Narrating the recent experience of a Sri Lankan garment company, a franchisee for Crocodile International in Sri Lanka, which chose to locate a garment unit in Chennai as part of its efforts to strengthen its in-house production capacity, Mr Sundar Rajan said after a few months running, the Sri Lankan company found the output from the Chennai factory to be far below the expectation, mainly on account of poor labour output, and finally decided to close it down.

The low labour output actually made the per-piece labour cost of the Chennai plant costlier than the one realised by his unit in the island nation. The Sri Lankan company has asked S P Apparels to spare its capacity for outsourcing.

Strengthening set-up

S P Apparels, according to Mr Sundara Rajan, has taken the dollar-rupee exchange debacle as an opportunity to strengthen its own product line and manufacturing set-up. “With all garment producing countries now geared to produce all product range — fashion or basics — the size of the company to meet the entire product range at definite cost advantage would be the choice of the buyers before the latter places orders,” he said, adding that in that sense, he expected integrated factories to get good work orders during the second half.

With more than 60 per cent of exports coming from euro and other non-dollar currency bookings, S P Apparels’ export realisation is cushioned to that extent from dollar impact. “Our customers have also agreed to give increased price for our exports and we stand to get two to three per cent higher prices. The increase in the duty drawback rate by 3 per cent allowed by the Government too has improved our realisation,” he added.

Growth projection

Despite the 14 per cent slide in realisation caused by the rupee appreciation, S P Apparels’ exports are set to achieve 10 per cent growth for the current year and the company hopes to post its turnover for 2007-08 at Rs 300 crore as against Rs 270 crore in 2006-07.

“If one takes into account the 14 per cent negative impact caused by the dollar slide, then the cumulative growth of our company this year should be taken as 25 per cent, which is quite impressive,” he added.

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S P Apparels bucks rupee impact, sustains export growth