Increasing efficiency . SP Apparels closes four small factories as part of consolidation

Avinashi, a Coimbatore-based SP Apparels garment manufacturer, has consolidated its factories by closing down four small factories, and moved employees to bigger factories for better efficiency in running the factories. Construction of the new factory at Sivakasi is set to start in July. Hopefully, in 12 months, it will be up and running, said the company’s CMD P Sundararajan.

“Last month, we consolidated our factories by closing them - some of the small factories, and we moved the employees to bigger factories, which has given us better efficiency in running the factories,” he said in the company’s Q4 earnings conference call.

“The consolidation of this factory was the need of the hour, which we did during the last year when there was a recession, global recession so we have a lesser inflow of orders. So, we made use of this opportunity to consolidate because it is very cost-effective and administratively better and easier. Customers for small-size factories are very reluctant to approach them. We have been thinking for a very long time, we should consolidate as much as possible. So that’s what we did that one,” he said.

Elaborating on the closure of the factories, S Latha, Executive Director, SP Apparels, told analysts that the company had 18 factories, of which four have been closed. The closed factories were small factories of 100 machines, and the company wanted to consolidate the machines for better efficiency and working for better control.

Of the 400 workers, 200-250 workers have been transferred to other factories. For the remaining 150 workers, the company is trying to increase the capacity of machines at the existing factory, she said. “We are not closing any more factories. In fact, we are going to increase capacity with our own machines with larger capacities,” she added.

‘Strong financial profile’

The integrated garment company for the first time crossed the ₹1,000 crore consolidated revenue mark in a fiscal by reporting ₹1,078 crore for the year ended March 31, 2023. This is a 25 per cent increase compared with ₹860 crore in the corresponding year. Net profit for the fiscal slid 3 per cent to ₹82 crore (₹85 crore) due to higher employee expenses at ₹239 crore (₹190 crore).

Founded in 1989, SPAL is India’s biggest manufacturer and exporter of knitted clothes for infants and children. It went public in 2016, and expanded the Crocodile brand in various States and cities in India.

On SPAL, ICRA in a recent report said, “Ratings reaffirmation ([ICRA]AA- (Stable) reaffirmed) factors in the company’s strong financial profile, characterised by a conservative capital structure, healthy coverage metrics and a strong liquidity position and expectation of steady operational and financial risk profiles in the medium term.”