Funskool mulls setting up third plant in Karnataka

Giving an overview of the business and the company’s growth plans, K John Baby, CEO, Funskool (India) said he is expecting to close March 2017 with sales of Rs 220 crore (net billing price). Though the initial projections were to reach Rs 250 crore, the impact of the demonetisation drive dented the revenues. 

“Since the note ban, for close to three months, we registered a dip of 25 per cent. Toys are a discretionary spend and therefore, the fear psychosis among people, hit our business,” he added. However, with the challenging period behind, Funskool envisages a 20 per cent growth. To achieve this, it has drawn up plans that include modernisation and expansion activities. 

“We have earmarked a sum of Rs 7 crore to Rs 10 crore as investments to automate the box-making or packaging process. The idea is to have products that can glide in easily rather than boxing them through a tough procedure,” the CEO said. John Baby also said Funskool has identified Karnataka as a potential manufacturing destination as part of its de-risking strategy. 

“Our Ranipet plant is running at full capacity while we have expanded capacity at our Goa plant, where we have added sheds, each measuring 48,000 sq ft and 30,000 sq ft respectively,” he said, noting that the choice of the neighbouring state is to not “put all eggs in one basket.” 

Currently, the twin facilities at Goa and Ranipet employ 1,000 people. The plan to establish the third unit has been scheduled for 2018-19 fiscal. Funskool is scouting for new brands to expand its product array but so far, it has not close to finalizing any acquisition. It has engaged KPMG for this exercise. Also, interestingly, the boardroom category of toys world-over had recorded a good performance last year. 

“It really was a year of the board games as our brand saw a 30 per cent spurt in business in this segment alone,” Baby said, noting that the estimated Rs 3,000 crore domestic toy industry is largely unorganised. Funskool is targeting new markets for boosting its exports, which currently constitute 20 per cent of its overall turnover.

“We are in Europe, UK, Australia and the US but we feel the scope for exports is more in the South American market,” John Baby said. To ramp up its business through retail outlets, he said the company will add on more to the present 19 stores based on the affordability of rentals. 

Funskool has been finding business picking up in Tier II destinations and its geographic growth has been most prominent in south.

 Compared to other locations, south contributes 35 per cent of its sales, with metros accounting for 60 per cent of the toy business revenues. The company spends around 10 per cent of its turnover towards marketing and brand building activities. 

On the design front too Funskool is strong, sourcing inputs from Hong Kong, given the dearth of design specialists in the domestic market. “We have ten design engineers working at our two design centres, and we typically introduce 5 to 6 new designs every month,” John Baby said.