The Reader's Digest Association Inc (RDA) is faced with a piquant situation. The industry ministry, which was moved by the RDA for permission to hike its stake in a joint venture formed in 1995 from 75 per cent to 100 per cent, has asked it to furnish a no-objection certificate from its domestic partner.
However, after being granted permission for the joint venture, RDA was not been able to find a local partner for the same and thus is unable to furnish a no-objection certificate.
Reader's Digest obtained permission to set up a joint venture named Reader's Digest Books Home Entertainment Products in 1995.
The venture was to have 75 per cent foreign equity, amounting to about $5 million.
Last year, the Centre granted a two-year extension for the foreign collaboration.
Now that the RDA has sought permission to up its stake in the venture from 75 to 100 per cent, thus turning it into a wholly-owned subsidiary, the FIPB - as it normally does - has asked the RDA to get the equity hike endorsed from its local partner.
According to sources close to Reader's Digest Association's home entertainment venture, the US-based media house has contended that since Reader's Digest Books Home Entertainment Products does not have a local partner, the question of a no-objection certificate does not arise.
"The home entertainment proposal never took off as Reader's Digest Association was unable to find a suitable local partner and that's why it now wants to hike its stake from 75 to 100 per cent," RDA sources said.
On the other hand, industry ministry sources have pointed out that Reader's Digest Association's proposed home entertainment venture is likely to run into trouble with the information and broadcasting ministry.
The I&B ministry is touchy about any new media proposals with 100 per cent foreign equity. Another proposal of RDA Inc to acquire the publishing assets of Reader's Digest India Print & Publishing (RDIPPL), which publishes Reader's Digest in the country, is pending with the FIPB awaiting a final clearance from the I&B ministry which is said to be against the proposal.
RDA Inc proposes to start a venture for books and home entertainment products such as CD-ROMs, compact discs, encyclopaedias and audio cassettes. "Nearly 75 per cent of RDA Inc's revenues come from these products in other parts of the world," sources added.
The company proposes to bring all its operations in the country_- namely the magazine business, as well as other home entertainment products _- under one company. Worldwide, too, its businesses are bunched under a single company.
