Sri Lanka’s idle textile factories that are badly hit by political and economic uncertainties, offer a good opportunity for Indian companies to take over them and start production immediately. That’s what Avinashi, Coimbatore-based textile major SP Apparels Ltd plans to do by taking over an existing idle factory as it plans to set up a subsidiary in the island country.

A report by Reuters in May said that Sri Lanka’s apparel export earnings could slump by $1 billion this year. Apparel is Sri Lanka’s largest industrial export and earned $5.95 billion in 2022, helping the country as it weathered its worst financial crisis since independence in 1948, triggered by a record reduction in foreign exchange reserves.

Explaining the reasons for setting up operations in Sri Lanka, P Sundararajan, CMD, SP Apparels Ltd, said in Sri Lanka the factories are idle for the month of August, and this is the right time the company gets into Sri Lankan manufacturing set up when the factories are already running with full workforce. “We have identified some full workforce because getting the workforce in Sri Lanka is as much challengeable as in India, so we thought we will make use of this opportunity,” he told analysts while discussing the company’s first quarter financial results,” he added.

The company has shortlisted some factories and in consultation with its customers and will go ahead with the plans. It is looking at the running factory to immediately get additional capacity. The factory will be up and running from Q4, later part of Q4 or from Q1 FY2025, he said while discussing the company’s first quarter financial results.

“We are only looking for factory on lease basis or on a contract basis as of now. Once we are comfortable with the operations then we will look at putting up projects there,” said CFO V Balaji.

To a question on reasons for selecting Sri Lanka where there is political instability and economic instability and they have been losing orders, and not Bangladesh, Vietnam or Cambodia, Sundarrajan said, yes, there are the possibilities of looking at Bangladesh or Vietnam or Cambodia. Vietnam and Cambodia. However, they are completely working on the Chinese model, which will not suit the company. China has been investing in big factories in Vietnam and Cambodia.

Only Bangladesh and Sri Lanka are the two options available. Bangladesh is always risky from the customers’ point of view, and given a chance they would like to move the business as much as possible to India as there are still issues related to compliance, fire safety and the work men unrest. There are also cultural problems to handle. Sri Lanka is a better choice, he said.

The share price of SP Apparels on the NSE closed at ₹523.50, down by 1.91 per cent

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