Iconic Swedish furniture multinational IKEA will invest 1.5 billion euros (Rs. 10,500 crore) to set up 25 mega stores in India in a move certain to cheer the government, which is battling charges of a policy standstill and dipping investments.
"IKEA's CEO Mikael Ohlsson met commerce and industry minister Anand Sharma in St Petersburg on Friday to confirm they will be investing 1.5 billion euros in India," a commerce ministry statement here said.
IKEA will make the investments through a wholly owned subsidiary in two stages of 600 million euros (Rs. 4,200 crore) and 900 million euros (Rs. 6,300 crore) to set up stores across the country.
"The CEO also communicated their decision to raise existing sourcing for their global operation from India significantly," the statement said.
Last year, opposition from some allies and Opposition parties had compelled the government to hold back a move to allow FDI in multi-brand retail.
It had, however, thrown open the gates for single-brand retail, hoping that marquee brands such as IKEA would invest in India.
Globally, single-brand retail businesses follow a model of 100% ownership and retail giants have been reluctant to set up shop in India, citing restrictive conditions, including the clause that makes it mandatory to source 30% of merchandise from local small firms and artisans.
In a statement, IKEA described India as a "very interesting and important market" but said, "It is important that the definition of small industries is reviewed and provides flexibility."
British footwear maker Pavers has been the lone applicant since the new norms for single-brand retail were notified in January.