Ikea foray: Godrej Interio lines up Rs 6 bn investment to expand capacity

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Godrej Interio, the furniture arm of the diversified Godrej Group, has lined up the investment of almost Rs 6 billion to expand its capacity and product portfolio.

Currently, the domestic home furnishing market is pegged at Rs 620 billion, of which the organised sector share is relatively smaller at 15 per cent but growing fast in tune with the rising incomes and ‘decor consciousness’ among the young working population.

“We have already invested close to Rs 4 billion in our plants and another Rs 2 billion would be invested in near future,” company senior vice-president Subodh Mehta told Business Standard. Godrej Interio operates 7 plants in different states, including Uttarakhand.

The world’s largest furniture retailer, Ikea has already sounded bullish on the Indian market and is now gearing up to launch its maiden store in Hyderabad next month after several years of market research and planning. Ikea had announced its India roadmap in 2012 with an initial investment of almost Rs 105 billion.

However, Godrej Interio predicts that competition posed by unorganised segment and international players would be limited owing to issues pertaining to the Goods and Services Tax (GST) and e-way bill. “Further, India’s current import policy would make it costlier to sell imported furniture. We foresee market consolidation in favour of the organised players. Our focus will be to cater customers with ‘Made to Order’ products and overcome local unorganised segment,” Mehta added.

While Ikea plans to launch company-owned stores, Godrej continues to bet on expanding its retail network largely under the franchisee route for greater market penetration and traction. The organised home furnishing space is also facing tough competition from e-commerce furniture start-ups viz. Pepperfry, UrbanLadder and FabFurnish.

Meanwhile, Godrej is under the process of launching a new range of steel furniture apart from an under research ‘smart mattress’ that connects to a mobile app, records sleeping pattern and offers customised features. The new products are being developed at its revamped Haridwar plant.

With a market share of 15 per cent, Godrej Interio is India’s top furniture brand in both home and institutional sectors. Once Ikea enters the domestic market, the two companies are expected to compete for a larger pie in the backdrop of growing organised home furnishing sector. The Swedish major is looking at Hyderabad, Bangalore, Mumbai, Gurugram, Surat, Ahmedabad, Kolkata, Chennai and Pune to expand its India footprint.

Meanwhile, Uttar Pradesh market clocked an annual growth of nearly 12 per cent over the past 5 years, Mehta informed. Last year, the company’s revenue from Uttar Pradesh and Uttarakhand stood at Rs 510 million and the company has projected 25 per cent growth in the current financial year.

It is present across 650 cities with over 250 exclusive showrooms, including about 150 franchisee stores, and 800 dealers. The retail network is in the process of expansion too.