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Journalism of Courage
NEW DELHI, Jan 11: The merger of Rothmans and BAT may mean the end of the former’s attempts to get into the country via a 100 per cent subsidiary route. The Rothmans proposal, which was being pursued vigorously for the past several months for an early clearance, is now being interpreted as an attempt by BAT to gain a back-door entry into the Indian market as BAT was not successful in its previous moves to hike its stake in ITC and set up an investment arm in the country.
Rothmans, in its application with the Foreign Investment Promotion Board (FIPB) submitted in November 1997, had sought permission to set up a 100 per cent subsidiary in India. Now, with the BAT-Rothmans merger, BAT will have to seek permission from the board of directors of its Indian partner, ITC Limited, if it wants to set-up a 100 per cent subsidiary in India to produce Rothmans cigarettes as per the FIPB guidelines.
Going by past instances, BAT may not be successful in setting up a 100 per cent subsidiary in India. It may be recalledthat ICI was told to take the clearance from the board of Asian Paints when the international paint major entered into a deal with one of the promoters to acquire over 9 per cent stake in the company.
Similarly, Denso Corporation of Japan, which holds over 20 per cent stake in Subros Ltd, was asked to take the Indian partners’ approval when it submitted a proposal to set up a new joint venture with the Kirloskar group setting up a automotive air-conditioners manufacturing unit.
