Itc Begins Licensing Talks For Bat Brands

Talks between executives of ITC Ltd and BAT Industries Plc began yesterday to discuss the nitty-gritty of the licensing arrangement for bringing Bats foreign brands into India.

The royalty fee, currently being negotiated, is expected to be lower than 5 per cent, the normal fee for technology transfer.

According to sources, BAT executives Tony Johnston and U Herter discussed these issues with ITC top brass at the latters Virginia House headquarters yesterday.

The key issue now is the royalty fee payment and the other management details pertaining to the introduction of the brands.

As reported by Business Standard on Monday, the ITC board at its last meeting gave its formal seal of approval to go ahead with a licensing arrangement with BAT for the launch of the international brands like State Express 555 and Benson and Hedges. The board has allowed ITC chairman Y C Deveshwar to move ahead on the royalty to be paid, subject to the discussions with BAT.

 

ITC sources said the final agreement would depend on the outcome of the board-to-board negotiations between ITC and BAT, since this involved a matter between the two corporates at the highest level. Besides, regulatory approvals for the brand licensing arrangement would also be required, the sources said.

Besides, the brand licensing issue, the BAT officials are also expected to participate in presentations made by ITC executives from the India Tobacco Division (ITD), the Hotels Division and others to update themselves of the progress made in these areas.

The sources said while the royalty for transfer of high technology would be around 5 per cent, in the ITC-BAT case it would involve payment for the BAT brands, which would then become part of ITCs brand portfolio. The period of licensing would be around 20-30 years, the sources said.

The chances, therefore, are that the royalty to be paid may be less than 5 per cent and would be fixed after the negotiations between the two sides.

There is no possibility of it going beyond 5 per cent, but the government also would have a say on this, the sources said, adding it should be the prerogative of both parties to arrive at a figure based on the formal negotiations. The fee would also set a kind of benchmark for brand royalties in India.