With the government of India relaxing the sourcing norms for foreign direct investment (FDI) in single-brand retail in 2012, Swedish furniture and home furnishing chain IKEA announced in October their intention to open stores in India.
Pratap (M Pratap, Indian administrative services officer and CEO of APInvest, Andhra Pradesh’s investment initiative) found out the contact name and phone number of Juvencio Maeztu, the CEO of IKEA India. I requested him to visit Hyderabad once.
Juvencio, the perfect gentleman that I found him to be later, was polite and made the right noises, assuring me that he would come and meet me. True to his word, he came in January 2013 with Jeff, who was responsible for store location.
I prepared a one-page speaking sheet on why Hyderabad was the ideal location for IKEA, listing out twenty-three points under four broad heads—demographic and economic advantage, resource advantage, commercial advantage, and governance advantage.
Juvencio and Jeff were impressed as I made the case for Hyderabad. After the meeting was over, Juvencio told me that he had come to Hyderabad as a courtesy to me since he had never ever received a call from any senior IAS officer. He said that before he came to Hyderabad, the plans for IKEA were stores in Bengaluru, Mumbai, and the National Capital Region. After hearing me, he said he had now expanded the list to four, with Hyderabad clearly in the mix.
I was determined that Hyderabad would be the destination for the first IKEA store in India.
I must give credit to IKEA that they kept an open mind. They had a very elaborate algorithm based on multiple criteria for storelocation.
As time went by, more and more IKEA teams began to visit Hyderabad, and I knew we were leading the race. By mid-2014, potential site locations were also identified by IKEA. It was now a two-horse race between Hyderabad and Bengaluru. Around Sept. 20, 2014, I came to know that IKEA was going to sign an MoU (memorandum of understanding) with the Karnataka government.
It was as if the heart of IKEA management preferred the aura of Bengaluru, even though the mind, with the algorithm results, favoured Hyderabad. I called Juvencio and expressed my unhappiness. I bluntly told him that the Hyderabad deal was off if IKEA signed the MoU with Karnataka first.
I think Juvencio understood my anguish, and the relationship we had developed over the past two years worked. He came to Hyderabad on the morning of September 24, 2014, and we signed an MoU to locate the first IKEA store in India in Hyderabad in the presence of Telangana chief minister, K Chandrashekar Rao (KCR). He then boarded a flight to Bengaluru and signed an MoU with the Karnataka government in the evening. A small but significant victory.
IKEA had also organised a big programme called Future Search in September 2013, and I was the only senior administrator who attended this four-day residential programme. This event was attended by some members of the top international management of IKEA, and during Future Search I got the opportunity to talk to them and further make the case for Hyderabad. IKEA also had a full board meeting in Hyderabad, and I was invited to make a presentation.
In it, I emphasised the social sector focus that IKEA should have. I stressed on supplier diversity, employment of local youth, especially women, and revival of the dying traditional arts and crafts of Telangana. I think this difference in approach made a huge impact, and Juvencio’s decision to open the first Indian IKEA store in Hyderabad received the full backing of the board.
The last issue to be resolved was the rate to be charged by the Telangana State Industrial Infrastructure Corporation (TSIIC), which owned the land selected by IKEA. The standard competitive bidding process would not work, so we had to give the land to IKEA at a mutually agreed rate. I had the full support of KCR in this regard as he was also keen on IKEA opening the store in Hyderabad.
In addition, the real estate market had not yet picked up and he wanted some sort of a benchmark to be set up for future transactions. I told Preet Dhupar, the finance person of IKEA, to make an offer. I also told her that I needed a 15% cushion on the price that they offered. She agreed and an offer was made.
After discussions with the CM, I counter-offered with an increase of 13 cent, and IKEA accepted. This actually did set a benchmark and the subsequent auctions of other nearby land by TSIIC a few years later fetched good rates.
In February 2014, IKEA took a delegation of officials from the states of their proposed locations to Sweden to visit the IKEA headquarters. I was invited as a representative of Hyderabad but I refused. I told Juvencio that I would not take any hospitality from IKEA until their store opened in Hyderabad.
Excerpted from K Pradeep Chandra’s Tiger Hunting Stories with permission from HarperCollins. We welcome your comments at ideas.india@qz.com.