India has emerged as a favored destination for foreign direct investment (FDI), owing to its large consumer base, skilled workforce, and robust regulatory environment. Many multinational companies (MNCs) have established wholly-owned subsidiaries or joint ventures in India to tap into this growth opportunity.

This article delves into case studies of successful foreign subsidiaries in India, highlighting their entry strategy, regulatory navigation, operational best practices, and financial performance—providing insights that can be valuable for foreign investors and CAs advising them.

Case Study 1:  Amazon India – E-Commerce Giant’s Strategic Expansion

Parent Company: Amazon.com, Inc.

Industry: E-commerce

Entry Mode: Wholly-owned subsidiary – Amazon Seller Services Pvt. Ltd.

Year of Entry: 2013

Strategy & Execution

1. Amazon entered India with a carefully localized approach. While FDI in multi-brand retail was restricted, Amazon operated through a marketplace model compliant with Indian FDI laws.
   
2. Set up a wholly-owned subsidiary to act as a technology and support services provider.
   
3. Used Indian subsidiaries like Cloudtail (initially a JV with Catamaran Ventures) to handle seller operations indirectly.
   
4. Invested over $6.5 billion in India, focused on logistics infrastructure, cloud services (AWS India), and digital payments (Amazon Pay).
   

Regulatory Navigation

1. Complied with FDI policy under Press Note 2 (2018) regulating e-commerce marketplaces.
   
2. Regularly adapted to changes in GST and data localization requirements.
   

Result

Despite regulatory challenges, Amazon became one of India’s top e-commerce players, second only to Flipkart. The India market is now a core part of its global expansion strategy.

Case Study 2: Hyundai Motor India – Manufacturing Success Story

Parent Company: Hyundai Motor Company (South Korea)

Industry: Automotive

Entry Mode: Wholly-owned subsidiary – Hyundai Motor India Ltd (HMIL)

Year of Entry: 1996

Strategy & Execution

1. Hyundai entered India as a wholly-owned manufacturing subsidiary, choosing Chennai as its base due to proximity to ports and skilled labor.
   
2. Adopted a Make in India approach before it was formalized as policy.
   
3. Established R&D capabilities in India and integrated it into the global supply chain.
   
4. Introduced models tailored to Indian preferences (e.g., Santro, i10, Creta).
   

Regulatory Navigation

1. Took advantage of 100% FDI allowance in the automotive sector.
   
2. Complied with Indian Automobile Industry Standards (AIS), safety, and emission norms (BS6).
   

Result

Hyundai India became the second-largest car manufacturer in India. It exports to over 80 countries from India, making it a critical hub for global operations.

Case Study 3: IKEA India – Navigating Retail Sector Challenges

Parent Company: Ingka Group (Netherlands)

Industry: Retail / Furniture

Entry Mode: Wholly-owned subsidiary – IKEA India Pvt. Ltd.

Year of Entry: 2013 (first store opened in 2018)

Strategy & Execution

1. IKEA opted for a 100% FDI route in single-brand retail, under India's relaxed FDI policy.
   
2. Invested over ₹10,500 crore (~$1.3 billion) for long-term expansion.
   
3. Customized product offerings and store layouts to suit Indian consumers.
   
4. Focused on sustainability and local sourcing, with 30-40% of products sourced locally.
   

Regulatory Navigation

1. Sought approval from DPIIT for 100% FDI.
   
2. Ensured compliance with local zoning regulations, FSSAI norms, and labour laws for retail staff.
   
3. Underwent complex land acquisition and urban planning clearances.
   

Result

IKEA’s India journey, though slower than expected, is seen as a model for long-term market commitment. It now operates large-format stores and online channels in key cities like Hyderabad, Mumbai, and Bengaluru.

Key Takeaways for CAs and Foreign Investors

Choose the right entry strategy:

Whether through a wholly-owned subsidiary or joint venture, the choice should align with sectoral FDI caps and operational goals.

Understand and comply with FDI regulations:

CAs play a key role in helping foreign entities navigate the evolving Indian legal and tax framework.

Plan for localization:

Tailoring offerings to Indian consumers is essential, as seen with IKEA and Hyundai.

Build regulatory resilience:

Continuous compliance with laws such as FEMA, GST, Companies Act, and sector-specific regulations is vital.

Leverage India’s ecosystem:

Utilize India not just as a market, but as a manufacturing, R&D, and export base, as demonstrated by Hyundai and Amazon.

Conclusion

India continues to offer tremendous opportunities for global businesses. The success of subsidiaries like Amazon, Hyundai, and IKEA underscores the importance of strategic planning, localization, and regulatory compliance. Chartered Accountants, acting as key advisors, are crucial in guiding foreign companies through entity setup, financial structuring, tax planning, and compliance, ensuring a sustainable presence in India.

For foreign investors looking to enter India, the right professional support can turn regulatory complexity into a strategic advantage.

Need help establishing a foreign subsidiary in India?

Get in touch with our expert CA team for entity setup, FDI compliance, and end-to-end financial advisory.