Advertising firm Rediffusion Dentsu Young & Rubicam Ltd (Rediff DY&R) has sought government permission to pay royalty to its Japanese financial and technical partner, Dentsu, for a further three-year period with retrospective effect from January 1, 2001.
The old royalty payment schedule expired on December 31, 2000, but has not been renewed yet.
The government normally does not permit royalty payment with retrospective effect. In its application to the foreign investment promotion board (FIPB), the company has said that the foreign collaborator's inputs in IT software and training in media planning and buying has helped the agency a lot. Thus the agency wants to continue with its relationship with Dentsu.
Japan's Dentsu is the world's fourth largest advertising agency. In India, the equity investment of Rs 5 lakh (40 per cent shareholding of the paid up equity capital of Rediff DY&R) has been made through Dentsu Holdings, Japan. But the technical collaboration has been entered into by Dentsu Young & Rubicam Partnerships, Singapore.
As per the previous technical collaboration, which was valid for a period of three years with effect from January 1, 1998, Rediff DY&R would pay royalty to the foreign partner at the rate of one per cent of sales.
Sources said Rediffusion has sought government permission to continue with the same arrangement. Rediffusion is one of the country's top advertising agencies with an annual gross turnover of around Rs 665 crore in 1999-2000.
