The UK Home Office Immigration Enforcement team raided MK Clothing Ltd and Fashion Times UK Ltd in the city in the East Midlands region of England last week and held 38 Indians and one Afghan man.
Of those detained, 31 had outstayed their visas, seven had entered the country illegally and one was working in breach of their visa conditions, Leicester Mercury reported.
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"Using illegal labour is not victimless. It cheats the taxpayer, undercuts honest businesses and denies legitimate job seekers of employment opportunities," saidassistant director Alison Spowage, from East Midlands Immigration Enforcement.
"The penalties for businesses that do not play by the rules are rightly severe. This operation, one of the largest- scale my team has conducted, sends a clear message that we have the resources to tackle immigration abuse.
All of our operations are intelligence-led and I would encourage people with detailed and specific information about illegal immigration to contact us," she said.
Immigration officials were accompanied by Leicestershire Police and HM Revenue and Customs (HMRC) officers during the raids.
The two firms could face fines of up to 20,000 pounds for each illegal worker if it is proven they did not take steps to establish their employees' legal status.
This translates up to 240,000 pounds for MK Clothing Ltd and 180,000 pounds for Fashion Times UK Ltd.
The two factories are yet to comment on the raids.
Under UK immigration rules, employers are required to carry out details right to work checks on the employees they hire and are liable for hefty fines if they are found to have hired workers who do not have the legal right to work in Britain.
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