Chennai: South India’s largest special economic zone (SEZ), Sri City, is planning to set up a new cluster that will accommodate Japanese small and medium enterprises (SMEs). It is also setting up ready-built factories (RBF), which will help these companies bring down capital costs and get their businesses off the ground quickly.
Sri City Managing Director Ravindra Sannareddy said the concept is similar to the plug-and-play concept adopted by the IT (information technology) industry, where an office building is developed complete with all infrastructure, so that the occupants can start their businesses from day one.
The RBFs will ensure quicker delivery time, fewer approvals, minimal paper work, adequate power and water. This will help MSMEs (micro, small and medium enterprises) reduce capital costs, since RBFs can be leased on payment of monthly rentals, said Shinya Fujii, director general, Japan External Trade Organisation (Jetro), Chennai.
Sannareddy said an entrepreneur starting a business with a capital of Rs 2 crore has to invest half of the money in machinery, people and raw material, and the remainder in buying land and meeting the construction costs. This will increase his debt burden and the outgo on interest. Now, the investment in setting up the factory will be saved, and can be pumped back into the business, he noted.
Ravi Menon, CEO, Premium Ingredients — a Spanish company that plans to invest Rs 30 crore in a facility to manufacture 2,000 tonnes of food ingredients per year — said a major advantage of this model is it offers flexibility in the event that a company wants to scale up or scale down its operations. Besides, it does away with the need to invest in land, leaving companies free to focus on operations. Sri City also secures all regulatory approvals.
The RBFs will be built in three different sizes — 5,000, 10,000 and 20,000 sq ft. In the first phase, the company is planning to build two RBFs. When demand increases, it plans to build 200,000 sq ft across 20 acres of land, which can accommodate up to 40 units. The company will invest around Rs 1 crore to set up each RBF, said Sannareddy.
He said he had targeted Japanese companies because Tamil Nadu is becoming a hub for automobile majors, and many Japanese suppliers have shown interest in the SEZ. Besides, Sri City has a Japanese enclave established in 2010 and currently has 14 Japanese customers with three companies of the Kobelco group (part of Kobe Steel), and other companies such as Metal One, NHK Springs, Unicharm, Piolax, AISAN and Kusakabe. The majority of the Japanese companies are in the engineering and auto components sector.
“Over 150 acres in the 300-acre SEZ has been allocated to existing Japanese customers and we plan to increase the size of the enclave to 500 acres to meet the increasing demand,” Sannareddy added. Some of the SMEs that have shown interest in the SEZ are from light engineering and toy manufacturing, among others, said Sannareddy.
Sri City is a private sector multi-product SEZ with a Domestic Tariff Zone (DTZ) and a Free Trade and Warehousing Zone (FTWZ) built in functional partnership with the government of Andhra Pradesh. The SEZ is strategically located on the border of Tamil Nadu and Andhra Pradesh, and houses around 80 companies from 23 countries, according to Sri City.
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