Swedish interiors giant IKEA brings in financing arm and expands retail business

The Swedish furnishing giant IKEA invites its investment division Ingka Investments to India. A senior official at the company relayed this information. This step shows that the IKEA group regards India as its priority market.

The investments being considered by Ingka Investments could be aligned with IKEA’s broader retail needs, ranging from taking stakes in companies in sectors such as renewable energy, recycling, real estate and software. The group’s investment arm has so far only invested in one startup in India, Livspace, for minority stakes.

This is in line with Ingka’s decision to complete the second phase of expansion this year. The company had pledged Rs 10,500 crore in foreign direct investment in the country in 2012.

Ingka Investments manages financial assets of over 20 billion euros worldwide. With this development, Ingka Group will bring all three of its businesses – IKEA Retail, Ingka Centers and Ingka Investments – to India. The group operates 482 IKEA stores in 31 countries.

Ingka Group has already opened some small city stores in Mumbai as well as in Hyderabad, Bengaluru and Navi Mumbai in the first phase. As a result, Ikea delivers orders in Pune, Surat and Vadodara. The group is investing US$900 million in two Ingka Centers (shopping malls centered around IKEA stores) in Noida and Gurgaon. These centers are expected to be operational within the next two years. The group purchases products from India through around 65 partners.

While the amount of the new investment is yet to be determined, sources familiar with the development said the company is considering opening stores in Chennai and Pune, as well as smaller stores in markets like Delhi.

Ikea sources said that 30 percent of the products in its Indian stores are local and the company is also exploring the possibility of boosting its exports. IKEA is also considering developing India as an export hub for wooden furniture, which will help the company diversify its sourcing across the country.

Ingka Investments takes a flexible approach to investments and can make investments ranging from minority holdings to full buyouts. It has invested €200 million in 25 companies to grow Ikea’s retail business. The company has made major investments in wind turbines in 14 countries and 10 solar parks in two countries, totaling 2.5 billion euros.

Ingka Investments has signed a purchase agreement to acquire prime real estate in Paris for an investment of EUR 130 million. The company recently acquired Med4Next, a cloud-based warehouse management system and supply chain software company.

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