S.P. Apparels Ltd. (SPAL) is one of the leading manufacturers and exporters of knitted garments for infants and children. The company provides end-to-end garment manufacturing, from greige fabric to finished products, including body suits, sleepsuits, tops and bottoms. SPAL is also the sub-licensee to manufacture, distribute and market adult menswear products in India under the ‘Crocodile’ brand.
SPAL recently came out with an IPO to fund its expansion plans. It proposes to utilize Rs. 750.7 million of the net IPO proceeds towards enhancing spinning capacity at an investment of Rs. 472.4 million. The company’s spinning capacity will increase from 16,896 to 22,272 spindles. The blow room capacity will increase from 3,200 kg/day to 15,015 kg/day.
SPAL is also setting up a new knitting unit in the spinning facility with a capex of Rs. 168.6 million. The company is also planning addition of balancing machineries at the existing dyeing unit at the SIPCOT facility at an investment of Rs. 49.1 million. It is also investing Rs. 60.6 million on common infrastructure for spinning and knitting facility.
These investments will lead to de-bottlenecking and backward integration, improve operational efficiency and quality control, and reduce the operating cost, leading to margin improvement and support for future expansion.
Growing aspiration among people in Tier II, III and IV cities in India and rising brand awareness and higher disposable income make these smaller urban areas as focal points for expansion. SPAL intends to capitalize on this opportunity to grow its menswear products under the ‘Crocodile’ brand. The company is planning capex of Rs. 278.5 million for establishing 70 new retail COCO stores, extending its presence from nine States to 18 States in India over next three years.
Backed with a strong management team with more than two decades of experience in textile and apparels industry, the company is a preferred vendor through long-standing relationships with reputed international brands like Tesco, ASDA, Primark, Mothercare, etc.
SPAL’s consolidated gross revenue for 2015-2016 was at Rs. 5,328.25 million (previous year: Rs. 4,725.66 million), registering a growth of 12.75 per cent. The consolidated operating profit (EBITDA) stood at Rs. 902.36 million (previous year: Rs. 755.52 million).
In 2015-16, the company added 120 sewing machines. The Processing Division achieved 85 per cent utilization of capacity. The embroidery and printing factories also achieved 90 per cent utilisation of capacities during the period.
With partial modernization of machines, the Spinning Division improved its yarn quality. Nearly 30 per cent production of yarn has been used for captive consumption of the garment division. Thus the improved quality of yarn is used for the fabric. The efficiency level of the factories of the Garment Division has shown five-10 per cent improvement during 2015-16.
SPAL’s 21 operating manufacturing facilities and the upcoming manufacturing facility at Netaji Apparel Park (NAP) are all located within a radius of approximately 125 km from its headquarters in Tirupur. The company has adopted a series technology upgradation and automation systems to enhance efficiency.
SPAL has further installed the Eton conveyor production system (automated sewing assembly line and workflow control), ASRS for efficient warehouse / inventory management and the Orgatex software system for automation of dyeing-related processes.