Swedish furniture giant IKEA has received the nod from the government's single-window body to clear foreign investment proposals, FIPB, to set up stores in India. In one of the largest FDI deals in single-brand retail so far, the company will invest over Rs 10,500 crore in India, reports Aakansha Sethi of CNBC-TV18.
The Foreign Investment Promotion Board (FIPB) has approved the proposal of IKEA, Economic Affairs Secretary Arvind Mayaram said.
IKEA Group, which manufactures and sells home and office furnishing products, proposes to invest in single-brand retail trading in India through a 100 percent subsidiary.
The company plans to make investments in two stages, the first of about Rs 4,200 crore and the second of about Rs 6,500 crore. It remains to be seen when the first stage concludes and the first store opens.
IKEA's proposal to set up 25 stores in India has already been scrutinised by the Department of Industrial Policy and Promotion (DIPP) in the Commerce and Industry Ministry. The proposal will now have to be cleared by the Cabinet Committee on Economic Affairs (CCEA) as the FIPB can clear investment applications worth up to Rs 1,200 crore only.
IKEA's would be the largest investment in the single-brand retailing ever since the government has allowed foreign investment in this sector in January.
With the government relaxing the mandatory 30 per cent sourcing clause in September, IKEA which had earlier expressed concerns over the issues had put in its final application earlier this month. The company has promised the government that it will meet the 30 percent local sourcing guidelines and they will also offer the IKEA home grocery items. However, these will only be under the single brand name and not raw fruits and vegetables. They will adhere to those norms as well and will not flout the single-brand norms. IKEA is also likely to offer flexi payment options to consumers.
For consumers too this comes as good news and at a time when the country is looking for foreign investment and it will bring in the much-needed forex.
The FIPB in its last meeting had cleared three single brand FDI proposals. They were of British footwear retailer Pavers England to open fully-owned stores, a 51 per cent joint venture of American luxury clothing retailer Brooks Brothers and Italian jewellery maker Damiani's plan to form a venture with Mehta's Pvt Ltd.
(With inputs from PTI)