Japan's Sumitomo Forestry buys 26% in furniture maker Spacewood for Rs85 cr

Sumitomo Forestry, a Japanese company dealing in housing, timber and building materials, has picked up a 26-per cent stake in Indian modular kitchen and furniture manufacturer Spacewood for about $14 million (about Rs85 crore).

Mumbai-based Spacewood said the deal is the first foreign direct investment (FDI) in the furniture industry in India.

Sumitomo Forestry Crest, a wholly-owned subsidiary of Sumitomo Forestry, would invest in the home furnishing business of Spacewood, which has a turnover of around Rs250 crore.

Spacewood's, which has a revenue in the range of Rs70 crore, whose other business vertical includes office furniture, is entering the business of manufacturing door frames among other building materials.

"We will use the funds for expansion of our retail outlets and setting up a new manufacturing facility of door manufacturing. We are aiming to add 35 retail outlets in the next three years while the new facility would see an investment of about Rs 25 crore," Kirit Joshi, co-founder of Spacewood, said.

Sumitomo Forestry Group on Wednesday announced the signing of a strategic alliance agreement with Spacewood Furnishers Pvt Ltd (SFPL) during a ceremony on 28 September 2015 in order to expand into new business fields in the high growth market in India.

Sumitomo Forestry plans to support the starting up of a new products manufacturing line at Nagpur, India, as well as building the infrastructure for sales of a variety Japanese building materials within India.

In recent years, there has been rapid urbanisation in India due to improvement in environment for wages and employment as well as increase in job opportunities in urban areas. The population in urban areas, where income levels are high, is expected to double by 2050.

The decision to expand into India is based on the expected growth in the business for building materials used in housing, as housing demand rises due to the increasing population. Through this alliance with SFPL, the Group aims to focus on the demand of the middle-income group, where the future population growth is most likely.

SFPL, a large manufacturer of modular kitchens and furniture in India, aims to further broaden its business areas by setting up a manufacturing line doors and door frames. Sumitomo Forestry Group will support SFPL by providing technical support from Sumitomo Forestry Crest Co, Ltd, a building products manufacturer and part of the group, and jointly work towards future expansion of the manufacturing line to include wooden interior fittings other than doors.

In addition, the group aims to use SFPL's supply chain network in India, such as company owned retail outlets and authorised dealers, to propose and provide quality Japanese building and housing interior materials into India's domestic market. Using knowledge and experience in the timber and building materials business that it has nurtured over the years, the group aims to work towards being

able to contribute to improving the housing environment and culture in India.