In July this year, Prime Minister Narendra Modi in his monthly ‘Mann Ki Baat’ address highlighted that import of toys have come down by a massive 70 per cent. On the other hand, the Ministry of Commerce & Industry pointed out that export of toys from the country have jumped by 61 per cent, during the same period, of FY19 - FY22. While import of toys was down from $371 mn to $110 mn, exports increased from $202 million to $326 million during this period.

If you are wondering what changed and why suddenly India is emerging as a player on the global toy industry landscape, one has to understand what is happening in a remote part of North-Western Karnataka. In the country’s first toy cluster in Koppal, there is a sense of optimism and dynamism rarely associated with India’s manufacturing prowess. However, before we go there, it is key to note the contours of the world-wide toy industry.

The global toy industry is estimated to be around $120 billion and growing annually at around 8 per cent. China — like in several low to mid-end manufacturing industries — has a vice-like grip on this sector accounting for nearly 70 per cent of it. However, with the world looking at China plus strategy to diversify and reduce over-reliance on that country, a market opportunity emerged.

As a part of its push to ensure greater manufacturing success stories from India, the Centre has been giving a thrust to local toy manufacturing, through various schemes like production linked incentive (PLI). According to a KPMG-FICCI report, the Indian toy industry which is at around $1 billion (including domestic and exports) could easily double or more by 2025 including a major chunk of exports. 

Koppal to Kansas
Meet Aequs – a $180 million enterprise – run by its dynamic Chairman and CEO, Arvind Melligeri.

Meet Aequs – a $180 million enterprise – run by its dynamic Chairman and CEO, Arvind Melligeri.

This holiday season, when a shopper in the US is picking up a nerf gun which shoots ammunition made from polyurethane foam, or power ranger toys or even a Peppa pig doll, all from the house of Hasbro – one of the world’s largest toy companies – there are high chances that these have been contract manufactured in Koppal, Karnataka by a group called Aequs.

Till recently, Koppal has been known for only two things – scanty rainfall and endemic poverty. A joint report by the State government and Niti Aayog acknowledged it to be the most backward district in the state. However, the efforts of one group and the vision of an individual is trying to change that to a large extent. Meet Aequs – a $180 million in annual revenue enterprise – run by its dynamic Chairman and CEO, Arvind Melligeri.

Aequs (formerly QuEST Global) is known more for manufacturing precision engineering aircraft components and supplying them to the likes of Boeing, Airbus Industries, Safran and Magellan, apart from other aviation companies. While it is a niche player in a high value, low volume sector, Aequs is a vertically integrated player in precision machining for aerosytems, aerostructures, landing gear and engine components.

Aequs’ manufacturing unit

Aequs’ manufacturing unit

If you are wondering about the connection between an aircraft component manufacturer and a toy manufacturing cluster, Melligeri has a pat answer. “It is all about creating ecosystems of efficiency, and developing mastery in discrete production. Just like an Indian IT services company would work for an FMCG player, a mining behemoth or a chemical producer, Aequs is the manufacturing services equivalent. We are a diversified contract manufacturing company which has vertically integrated product solutions for the aerospace, toys and consumer durables industries.”

Unlike a mere manufacturer, Aequs runs a cluster SEZ (Special Economic Zone) which seeks to attract a number of players to set up their toy manufacturing factories at the facilities setup. Today the Koppal Toy cluster manufactures not only for Hasbro but also for several other global players like Chicco, Spin Master, Stomp Rocket, Play Shifu and others. From outdoor toys, vehicles, playsets, figurines, STEM and infant related, there is no toy segment which is not addressed.

Complexity of toy manufacturing
The toys are getting a final touch at the hands of Aequs employees.

The toys are getting a final touch at the hands of Aequs employees.

Melligeri recalls that sometime in 2014-15, through his network of aviation industry partners, he came across senior executives from Hasbro looking to diversify their manufacturing base. “Initially we were hesitant. What is common to producing precision engineering aircraft components to mass producing toys, we wondered? We realised that our design, development, model making, tooling, molding, painting, jigs and fixtures engineering, assembly and packaging skills were exactly what was needed for the toy industry too.”

Toys, like aircraft components, involved safety; there should be no lead in paints, it had to be toxic free, quality and precision metrics had to be high as a large user base were kids. India, says Melligeri, operates at one-third the labour cost of China and half of Vietnam. The cost of electricity in the country was lower than China and there was a huge pool of engineering resources created every year. While productivity was a bit lower, it can be made up through other cost levers and become globally competitive.

Land prices in Koppal were significantly lower than most other places in the country and there was a pool of labour who could be trained to do basics like painting, assembly, operating molding machines and packaging, says Aequs. Unlike China, where European and American buyers were wary of human resources practices, India’s stringent laws and its democratic openness, provided an edge to suppliers from the country. Koppal also has good sea, rail, air, road connectivity, which clinched the deal for it.

Government support
The toy empire’s bright employees at work in an assembly line

The toy empire’s bright employees at work in an assembly line

With active support from the state government, Aequs set up a national level skill development center at Bhanapur, Koppal in collaboration with Karnataka Skill Development Corporation and Vishweshwariah Technical University. Over a period of seven years, it will train more than 25,000 youth in design, development, model making, tooling, molding, painting, electrical and electronics assembly, testing, quality assurance apart from warehousing & logistics.

The Union government is also providing capital investment subsidy upto 30 per cent of fixed assets, a wage subsidy of ₹1500 per month per employee for five years, an interest subsidy of five per cent, a freight subsidy upto 75 per cent for exports, guaranteed power supply at ₹2 per unit for five years, a 50 per cent reimbursement of rent and a training assistance of ₹12,500 per candidate, apart from other incentives for all units located in the toy cluster SEZ.

Aequs has set up a national level skill development center at Bhanapur, Koppal in collaboration with Karnataka Skill Development Corporation and Vishweshwariah Technical University

Aequs has set up a national level skill development center at Bhanapur, Koppal in collaboration with Karnataka Skill Development Corporation and Vishweshwariah Technical University

Amidst the pandemic, even as large swathes of the world shutdown, the Koppal toy cluster came up, hosting manufacturing facilities from a multitude of players. Developed under the aegis of Aequs Infra, a group company, Melligeri says, the toy cluster will provide world-class facilities backed by state-of-the-art technologies. “Our plug and play, built to suit facilities, is aimed at all verticals of toy manufacturing. We are a 400-acre exclusive processing zone with numerous incentives provided by the government, well connected for all modes of travel with and a large pool of employable youth. Our intention is to ensure India emerges as a global powerhouse in toy manufacturing.”

One of the strikes against the Indian economic growth story is that it has been that it has been a ‘jobless’ growth. story. With millions of youngsters getting added to the workforce every year, it is crucial for the country to provide large scale employment which only the manufacturing sector can. For that to happen, more success stories like the Koppal toy cluster have to be replicated across the country. Melligeri though is gung-ho about prospects, “We are at the cusp of the Indian growth story. What India did in the global IT services, we can do for manufacturing including toys. Aequs is ready to play its part,” he adds.

social-fb COMMENT NOW