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Tuesday, November 20, 2012

FIPB clears IKEA’s 10k cr plan for India

Largest Foreign Investment Proposal In Single-Brand Retail Now Goes To CCEA


New Delhi: Swedish furniture giant IKEA's plans to enter the lucrative Indian retail market moved a step closer on Tuesday with the Foreign Investment Promotion Board (FIPB) approving the firm's over Rs 10,000-crore proposal. 
    Economic affairs secretary Arvind Mayaram told reporters after an FIPB meeting that the board had approved IKEA's proposal. The Cabinet Committee on Economic Affairs (CCEA) will now examine the proposal and is likely to approve the investment, which will be the largest one in the singlebrand retail sector so far. 

    IKEA's plans to invest in the country is seen by the government as an approval of the attractiveness of the India growth story by foreign investors. The proposal comes at a time when the government is trying to woo foreign investment to revive growth, provide jobs and boost sentiment. 
    Last month, IKEA had filed final documents to start its retail venture after the government amended the policy on single-brand retail. The furniture major plans to invest over Rs 10,000 crore in a 
phased manner. In the first phase, it plans to start 25 stores and invest in India through a 100% subsidiary. 
    In September, the government unveiled the rules for single-brand retail, diluting the sourcing norms to enable IKEA to set shop in the country. The government has allowed 100% FDI in singlebrand retail, and 51% in multi-brand retail. 
    The FIPB approval comes against the backdrop of stiff opposition to the government move to open up the multibrand retail sector to global firms. Opposition parties are expected to give a tough time to the government on the issue of allowing FDI in multibrand retail when Parliament convenes for the winter session on Thursday. 
    Earlier, the FIPB had ap
proved three proposals in the single-brand retail sector, which included British footwear maker Pavers England's plan to start fully-owned stores, US luxury clothing Brooks Brothers' proposal for a 51% joint venture and Italian jewellery manufacturer Damiani's move to start a joint venture. 
    IKEA had earlier said that it viewed the recent developments related to FDI in singlebrand retail positively. The Swedish firm views India as an important market and has been sourcing from the country for the past several years. IKEA has said it will develop a "solid plan" for setting up stores once its application is approved. It has also said that it will continue to increase its sourcing in India from both existing and new suppliers, building on long-term relations. 

SETTING SHOP 

• Govt is keen on IKEA's investment, seeing it as an approval by foreign cos of the continuing India growth story 

• The Swedish furniture maker's plan also coincides with the govt's efforts to revive growth and boost business sentiment 

• The first phase of IKEA's plan will involve setting up 25 stores in India and investing through a fully-owned subsidiary

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