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Ikea’s Rs.10,500-crore FDI proposal gets FIPB nod

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SummaryThe Foreign Investment Promotion Board on Monday approved Swedish furniture maker Ikea’s R10,500-crore proposal to set up 25 stores in the country on the lines of its global model.

of its November 20, 2012, decision. Subsequently, the FIPB deliberated on the representation at its meeting on December 31, 2012, and sought clarifications from the company.

The government in September 2012 relaxed a provision requiring single-brand retailers to source at least 30% of their requirements from small and medium enterprises, modifying rules to say it was “preferable” rather than ‘mandatory. Ikea will operate in India through its wholly-owned subsidiary Ingka Holding Overseas BV and the investment of R10,500 crore will be the largest ever by a single-brand retailer in India.

For the government Ikea had almost become a test case since it decided to liberalise the cap of 51% foreign investment in single-brand retail to 100%. Though there are several companies which have set up shop in India in the single-brand category ever since it was allowed in 2006, Ikea had made it clear that it would enter the Indian market only once 100% foreign direct investment is allowed. Though the government last year allowed up to 51% foreign investment in multi-brand retail also, the number of caveats with which it has come into force may mean a long time before any real investments flow in. In that context investors were closely viewing Ikea’s fate.

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