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More than two years after the government cleared IKEA’s euro 1.5-billion (Rs 10,500-crore) proposal to set up about 25 stores in India, the Swedish furnishing company on Friday announced the purchase of its first land parcel in the country.
The euro 27-billion chain has bought 13 acres close to the information technology hub in Hyderabad, where its first store is expected to be set up by the end of this year or early the next. The company’s proposal for the largest foreign direct investment (FDI) in the Indian retail space secured the Cabinet’s approval in January 2013.
Since then, IKEA has been engaged with several state governments to identify locations. Globally, the company works around the concept of a large-store format in major cities with accessible public transport. As of last year, it had 361 stores globally.
IKEA had tried to enter India several years ago, when foreign investment in single-brand retail was restricted. It pulled out because of lack of clarity on policy.
This time, it has seen controversy in terms of compliance with single-brand FDI guidelines on mandatory sourcing from India. After months of back-and-forth, the United Progressive Alliance government had tweaked the single-brand retail rules, allowing single-brand foreign chains to source 30 per cent from India, preferably from small and medium enterprises.
Earlier, the guidelines mandated 30 per cent sourcing from Indian MSMEs, making it tough for a company such as IKEA to do business in India. Now, IKEA is weighing sites in Bengaluru, Mumbai, and the Delhi-National Capital Region to open 25 stores, as planned, in the long term.
"We strongly believe Hyderabad offers a business-friendly environment, with a proactive and progressive government. Its unique socio-cultural diversity, with a rapidly emerging women workforce, resonates with our core belief in diversity and is an enabler for our goal to recruit 50 per cent women managers and co-workers,” said Juvencio Maeztu, chief executive officer, IKEA India.
