Aequs to design, manufacture toys for Disney

Aequs Pvt Ltd, a contract manufacturing major for aerospace and consumer goods based in Karnataka’s Belgaum district, will now design and develop toys for Disney at the Koppal Toy Cluster (KTC) in Karnataka.

The company has signed a contract with Stone Sapphire, licensee for Disney in India, to design and manufacture 36 collectible Marvel pullback cars.

“We started as an OEM (original equipment manufacturing) manufacturer in 2016, this is the first time we are doing ODM (original design and manufacturing) toys,” Aequs chairman and chief executive officer, Aravind Melligeri told DH, not revealing the deal size. This is an open-ended strategic relationship between Stone Sapphire and Aequs Toys, he added.

This is also the first time a pure-play contract manufacturer in India is venturing into ODM for a company like Stone Sapphire, Melligeri suggested.

The design process started 18 months ago and the company has manufactured 2 lakh toys in the launch phase, which will be available in the market next week. It is set to start exports to the Gulf countries next quarter.

Manufacturing a new toy needs an investment of anything between $2,00,000 and $3,00,000 that includes molds and tools specific to that design, Melligeri said. Given the current capacity (which is rather underutilised), Melligeri said, the company can make 2 lakh toys a month or 6,600 a day.

It has collaborated with about 15-20 micro, small and medium enterprises (MSMEs) for various parts of the product, stickers and packaging and has about 200 workers on its shop floor working on the Disney toys. The production of the toys will be split between the company’s 300-acre unit in the special economic zone (SEZ) part of the cluster and 150-acre unit in the domestic tariff area (DTA) section of the park.

Aequs, which was largely exporting toys, set up the DTA unit to be able to access the domestic market without being charged the import duty, Melligeri explained. The import duty on toys was increased from 60 per cent to 70 per cent in Budget 2023 (chargeable even on products coming from SEZs). Pursuant to this, toy imports dropped 70 per cent, cutting out particularly the inflow of Hot Wheels from Malaysia and Chinese products, he added.

Addressing the market opened up by the import barrier, Aequs is pricing its new Disney toys between Rs 300 and Rs 400 a piece, targeting the larger middle-class consumer. According to Melligeri, inflation has hit the toy industry globally, but India is still doing well. “The consumption demand is high in India but the distribution efficiency needs to be improved, especially in the smaller cities to be able to address the demand there,” he said.

While the global toy market is $90 billion, the Indian market is presently estimated at $1.5 billion, which is projected to reach $3 billion by 2028, moving at a compound annual growth rate of 12 per cent since 2022. Melligeri urged for production-linked incentives, arguing that India does not yet have the ecosystem needed to become a major toy maker.

Aequs, which has already pumped over Rs 400 crore into Koppal, eventually hopes to move its Belagavi toy production line (which caters to four customers) to the cluster, where products of its seven other customers are made. Incidentally, of the 11 brands Aequs produces, only two are Indian. It counts FirstCry, PlayShifu, Hasbro and Spin Master among its clients. The toy segment contributes only 20 per cent to the company’s topline.