Swedish privately held, international furniture retailer IKEA has finally agreed to comply with the amended policy on FDI in single brand retail, and has filed a fresh investment proposal with the Department of Industrial Policy and Promotion,India (DIPP).
As reported in the media, IKEA has informed the government that it will maintain two separate companies in India, one for sourcing and the other for local retailing which would have foreign investment.
The retailer has also agreed to adhere to the statutory 30% local sourcing norm from small and medium vendors. As per the revised clarification from the government, the local sourcing requirements would be based on the total value of the goods purchased locally over an average period of five years. IKEA had originally demanded a moratorium of ten years for this clause.
Regarding retail of food products from cafés in IKEA outlets, the retailer has said that it would only sell branded Swedish food, chocolates, packages of gravy and various Scandinavian biscuits and crackers, among others, and it will desist from selling any unbranded raw fruit or vegetables from the IKEA Swedish Food Market that are usually part of their stores worldwide.
IKEA has committed to invest $1.9 billion in two phases. The first stage will see an investment of 600 million, over 10 years, for launching a chain of 10 stores, and other associated infrastructure. The second stage will get an additional investment of € 900 million, for adding another 15 outlets across India.
Once the proposal is cleared by the government, IKEA will require three years to build its supply chain and set up its first store.
IKEA is the largest single brand retailer in the world, having 336 outlets across 44 countries, with total annual income of € 25 billion.