The euro 25-billion Swedish furniture company, IKEA, has taken the first crucial step in starting the India business. Even before it gets the government clearances on setting shop here, the group has appointed its India head. Amid speculation on whether the India operation would be headed by a foreigner or an Indian, the biggest furniture maker of the world has appointed an European--Juvencio Maeztu--as the country manager, IKEA Retail India, an official confirmed.
Almost four months after its June 22 application with the Department of Industrial Policy and Promotion (DIPP) seeking to invest Euro 1.5 billion in India, the company has given its final inputs and clarification sought by the government. The government eased the single brand retail guidelines last month, thereby removing many of the roadblocks that IKEA had concerns over.
While the FDI level was increased from 51% to 100% last November, the condition on mandatory 30% sourcing from small sector industries was seen as a hurdle by many foreign investors including IKEA. Recently, the government tweaked that condition, saying 30per cent must be sourced from India and preferably from small and medium sector units.
Born in Spain, Maeztu has been with IKEA for 12 years across many geographies and functions. An economist, with an MBA degree, Maeztu was earlier in Spain and later shifted to IKEA’s London operation.
This is the second coming for IKEA in India. A few years ago, it had sought to enter India, but decided to drop the plan due to the FDI restriction in the country. IKEA always wanted to be on its own with 100 per cent ownership, rather than diluting its brand with a partner.
According to people in the know of things, the chain is expected to take around three years, after getting all the clearances, to set up its first two to three stores in India. The IKEA application is likely to go to the Foreign Investment Promotion Board (FIPB) soon, after which the Union cabinet would take up the matter as the investment quantum is over Rs 10,000 crore.
The IKEA stores would be quite like their international counterparts, and may occupy as much as 100,000 sq ft of space each. An IKEA senior management team, headed by Maeztu, has been in India for more than a month now, looking for real estate across the country
The first few outlets are expected to be rolled out on the outskirts of Delhi, Mumbai, Bangalore, Hyderabad and Chennai.
According to the IKEA proposal to DIPP, the company had a vision of establishing 10 stores over a 10-year horizon and around 25 over a longer period.