CANALI’s latest move illustrates uncertainty related to FDI legislation changes in India

CANALI store at Palladium Mall, Mumbai, India

Italian luxury brand Canali proposed a majority 51% stake to form a joint venture with its long time Indian franchisee, Genesis Luxury Fashion, according to The Economic Times (India Times). Although Canali had the option to set up a wholly-owned subsidiary, following the government’s decision last month to allow 100% foreign direct investment in single-brand retail, it has opted to stick to the previous ceiling.

A higher shareholding would have required it to mandatorily source 30% of its products from Indian small and medium enterprises. Small and medium enterprises are defined as companies that have a total investment in plant and machinery not exceeding $1 million.

Canali is the first luxury brand to invest in India since the government removed the cap for foreign companies in December 2011. Genesis, a franchise for several global luxury brands, has been operating five Canali stores in India – two in the National Capital Region, at the DLF Emporio Mall and at the Oberoi hotel in Gurgaon, and one each in Mumbai’s Palladium mall, Hyderabad’s Taj Krishna hotel and Bangalore’s UB City mall.