India Investment Agency Clears Ikea Proposal to Set Up Stores - Wall Street Journal (India)

By RAJESH ROY NEW DELHI—Ikea Group took a significant step Tuesday toward setting up wholly owned stores in one of the furniture retailer's largest untapped markets, as India's foreign investment board forwarded the Swedish company's proposal to the federal cabinet. Casper Hedberg/Bloomberg News An Ikea store in Stockholm, Sweden. The company in June sought permission to set up 25 stores in India. Economic Affairs Secretary Arvind Mayaram said the Foreign Investment Promotion Board has cleared the proposal. The Cabinet Committee on Economic Affairs, which will now study the plan, is widely expected to give the go-ahead, especially because it has already received the foreign investment board's recommendation. The board is required to send all investment proposals of more than 12 billion rupees, or $218 million, to the cabinet. Ikea is only the second foreign retailer, after U.K. footwear company Pavers England, to get the board's approval to set up wholly owned stores in India. In June, the Swedish company sought India's permission to invest €1.5 billion ($1.9 billion) to set up 25 stores. If implemented, Ikea's investment would be the largest by a global company since New Delhi last year allowed 100% foreign ownership in single-brand retail ventures, where a company sells only its own brand of goods. Previously, foreign companies could own a maximum 51% stake in such retail operations. Ikea, which is known globally for its furniture and household goods, plans to invest in India through a group company called Ingka Holding Overseas BV. Ikea currently sources products from India for its global operations. Foreign retailers are looking to set up operations in India at a time when the country's growing middle class is increasingly adopting Western trends and tastes. Ikea and other foreign retailers were initially concerned about a rule that required them to source products worth at least 30% of the value of their sales in India from small and midsize companies. This September, the government relaxed that rule to allow them to also source from big Indian companies. In September, the Indian government also revived a plan to let foreign retailers such as Wal-Mart Stores Inc. of the U.S. and Carrefour SA of France own as much as 51% of local multibrand ventures. Wal-Mart has said it expects to apply by the end of November for permission to set up a full supermarket joint venture. via Business - Google News

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