CCEA to rule on IKEA’s Rs10,500-crore investment plan next week

Swedish furniture company IKEA will learn by next week whether the Indian government will approve its investment plan in totality, a top government official today said.

In January, the Foreign Investment Promotion Board (FIPB) had allowed IKEA to invest only Rs4,200 crore out of the Rs10,500 crore that it had proposed to spend in opening single-brand retail stores across the country.

In its application submitted in June 2012, IKEA had proposed  an investment of No Rs10,500 crore to set up 10 furnishing and homeware stores as well as allied infrastructure over 10 years in India. Subsequently, it plans to open 15 more stores.

However, the FIPB in its 20 November 2012 meeting cleared investments of only Rs4,200 crore by IKEA and forwarded the proposal to the cabinet committee on economic affairs (CCEA) for consideration, as proposals of foreign direct investment of over Rs1,200 crore requires CCEA approval.

Apart from furniture, IKEA had in its original application, sought approval to sell items such as upholstery and other accessories, consumer electronics, leather products, and lifestyle products, food and beverages.

IKEA has also once again sent its application for review, seeking permission to let it open cafeteria inside all its stores in India, in line with its all its store worldwide.

"The IKEA Group must have the ability to retail its entire range of products in India, as is being done globally in every country where IKEA stores are located. This is as per the IKEA concept," a company spokeswoman had earlier said.

"We expect to have IKEA restaurant and cafe inside the IKEA stores in India as every other store worldwide. The IKEA cafe / restaurant is a mandatory and an integral part of the IKEA concept and offer to our customers,'' she had added.

While India allows automatic foreign direct investment in most sectors, foreign investments in certain sectors require FIPB approval. Also, investments of over Rs1,200 crore require cabinet clearance.

Founded in 1943 in Sweden by Ingvar Kamprad, IKEA is the world's largest furniture retailer and the world's third-largest consumer of wood, behind The Home Depot and Lowe's.

The privately-run company operates 338 stores in 38 countries and sold furniture worth $27.5 billion last year.

IKEA Group is owned by Liechtenstein-based Interogo Foundation, owned by the Kamprad family. IKEA is now run jointly by Kamprad's three sons Peter, Jonas, and Matthias.

Eighty three year-old Kamprad, a billionaire whose net worth is around $42 billion, lives in Switzerland, but has a very ordinary lifestyle.

Wearing a faded coat and old shoes most of the time, he looks like a pensioner living on a tight budget. He always flies on economy flights, drives a 15-year-old Volvo, and travels by tubes and buses while in London.

He is reported to visit the market himself in the afternoons, when prices in his local market start to fall.