The surge is driven by rising demand for preschool and educational toys, increasing parental awareness of developmental play, a growing preference for locally made products and, importantly, global buyers who now view India as a stable, dependable sourcing base. In many ways, the environment appears tailor-made for Chennai-based Funskool, a well-known MRF Group company and one of India’s largest contributors to toy exports. Over the past few years, the company has been strengthening its design capabilities, expanding production facilities and modernising systems to meet rising global expectations. Funskool’s Goa facility is undergoing a major expansion of nearly 50 per cent, adding over 80,000 sq ft.
The IMARC report lists Funskool among the leading players in the Indian market, standing alongside global giants like Hasbro, Mattel, LEGO, Simba and Hamleys, and homegrown manufacturers such as Toyzone, Micro Plastics and Plastech International. Maharashtra, Tamil Nadu, Karnataka and Gujarat form the major toy manufacturing hubs, with Tamil Nadu holding a significant share due to its established factories, including Funskool’s Ranipet unit.
Momentum for India
India has emerged as an alternative global toy-sourcing destination to China. In response, the company upgraded its machinery, streamlined workflows and strengthened quality systems to match global manufacturing standards. “Around 2016, customers were looking for alternatives to China. We saw the opportunity and built capacity in India,” says K A Shabir, CEO. The strategy worked. “Customers saw we could deliver consistently. That helped us secure more orders,” he adds. Funskool’s Ranipet facility now serves as the principal export hub, housing moulding, assembly, printing and even a dedicated wooden toy section. The company is also building capacity in tooling and mould-making to improve speed, precision and delivery timelines.
However, tariff changes in markets such as the United States have added complexity. “Some of our US customers were worried about tariff changes and thought of moving their tooling. We retained them by giving price support and by showing that India is a stable base,” points out Shabir.
Funskool has invested heavily in product development. About 30 people are involved in design and R&D. Women form the backbone of its production lines: around 70 per cent of workers in the Goa unit and more than 75 per cent in Ranipet are women. “They handle assembly, painting, packing and quality checks. They form the backbone of our production,” highlights Shabir.
Funskool also leads in sustainability efforts. It was probably the first toy manufacturer in India to adopt solar power, with 54 per cent of the Ranipet unit’s energy now sourced from solar. “We started this to reduce costs and to run our operations more cleanly. We want to increase it further,” Shabir says. Safety and waste reduction are also core priorities. All toys undergo rigorous safety testing, and the company recycles as much plastic waste as possible.
Online vs offline
Funskool sells through 100 distributors and 600 dealers across more than 4000 stores. The south remains its strongest market, while the north and west favour higher-value games and puzzles. Domestic consumption patterns are shifting rapidly due to e-commerce and quick-commerce platforms, which are accelerating impulse buying. “Our focus will always be equal, both offline and online. But we are seeing a surge in customer response,” points out Shabir. According to him, parents who earlier preferred to touch and feel toys are now making quicker decisions online. Yet, he stresses that the shift is uneven. “It may be there in some metros, but India still has a lot of room for growth.”
Import dependency
One of the most persistent challenges for Indian toy manufacturers is the lack of local suppliers for low-value essential electronic components. “We depend on imports for electronic parts like sound modules, motors and sensors. These are simple parts but not made here at the required quality and cost in enough quantity,” highlights Shabir. He believes domestic supplier development or duty-free import of low-value components would significantly reduce cost and lead times.
While the Indian government has announced plans for toy clusters and broader manufacturing support, detailed guidelines are awaited. The withdrawal of export credit benefits has also affected exporters. “Interest subvention for export credit has also been withdrawn, increasing financing costs,” he notes. Meanwhile, GST rates on toys have been rationalised from 12 per cent to 5 per cent for most categories, but electronic toys still attract 18 per cent. “We have asked for one single slab,” he adds.
Financial Performance
The company has set a target of USD 45 million in turnover for the current financial year. It mainly exports puzzles, games, educational toys, preschool items, wooden toys and moulded toys to more than 30 countries, including Europe, the Gulf, Africa, Australia and Asia.
About two-thirds of Funskool’s revenue comes from OEM manufacturing, with the remaining one-third from its own brands. Despite external uncertainties, the company expects to close this year just above USD 40 million. Several U.S. customers have scaled back their forecasts due to tariff uncertainty, which is important because the U.S. accounts for around 45 per cent of Funskool’s export revenues. This has affected growth in the latter half of the year.
However, with multiple bilateral trade agreements underway and optimism around a potential resolution of U.S. tariffs, Shabir remains confident.
Funskool now aims to touch USD 50 million in exports within the next two years. “If the market stays stable, we will reach that number,” he adds.