Local players give thumbs up to IKEA's entry in India

Furniture, MDF board makers feel entry of global giant may boost demand

Entry of global giants like IKEA is likely to boost demand for branded furniture in the Indian market, feel local players.

Anant Maloo, chairman and managing director, Timbor Home Ltd, says, "IKEA's entry into India will open up the local furniture market into an organised and ready to use furniture market, it will further open doors for more foreign brands to come in and expand the market further and also create opportunities for mergers and acquisitions for the local brands."

He further explains, "If you were to see globally, wherever Ikea has gone they have not wiped out the local competition, in fact the local brands have grown, due to the consumption of ready to use furniture going up. We feel the same would happen here and we are very excited to see them operate in India."

IKEA has recently received the go ahead from the foreign investment promotion board (FIPB) to invest in India, and the company plans to invest over Rs 10,500 crore in single-brand retail in the country.

The Swedish furniture retailer which operates 336 stores in 44 countries plans to set up 10 stores over 10 years and around 25 over a longer period.

IKEA offers furniture in all materials, be it particle boards, medium-density fibre (MDF) or solid wood. As Maloo puts it, "Companies like IKEA have the capability to increase consumption of a product or concept. This shall happen in India too and the market for branded furniture will grow both regionally and nationally, creating tremendous opportunities for local brands."

On top of this, as the foreign retailer is also expected to preferably source around 30 per cent of their goods from India, raw material makers see it as an opportunity to grow their business.

Players like Shirdi Industries, makers of MDF, particle boards and laminates which is planning to focus on its furniture division to drive business in the coming years is banking on the entry of global giants like IKEA to create fresh demand in the industry.

The company is looking forward to working as a vendor for the international brand and has had informal talks with IKEA representatives.

Nothing has been finalised though. IKEA is yet to start talking to vendors officially in the country, clarified Gaurav Agarwal, vice president, marketing of Shirdi Industries Ltd, the owners of the Asis brand.

Agarwal further added, "We expect IKEA to source at least 40-45 per cent of its requirement from India. And also as they are expected to go aggressively about advertising their products, it would instill consumer confidence in MDF furniture and boost the industry. At present, Indians mainly prefer to get carpenter-made furniture from wood or plywood."

The company, on its part, is working on expanding its MDF and laminates manufacturing capacity at its Rudrapur (Uttarakhand) plant with an investment of around Rs 110 crore. "We are yet to decide on by how much the capacity would be scaled up," Agarwal said.

Currently, Shirdi Industries has an installed capacity of making 200 cubic meters of MDF per day, apart from 220 cubic meters of particle board per day and 200 cubic meters of plywood per day. It has two plants in Uttarakhand, at Rudrapur and Roorkee, apart from Coimbatore in Tamil Nadu and Bhiwandi near Mumbai.

A senior official of Nilkamal which owns and operates the @Home stores, said that the entry of the global player is expected to attract more people to furniture retailing as well as boost demand for machine-made furniture.