The Hindu Business Line : ‘Premier Travel plan can be referred to project board’

New Delhi, Sept 27 The Foreign Investment Promotion Board (FIPB) has recommended that the proposal of Premier Travel Inn India Ltd, UK, which entails payment of monthly franchisee and marketing fee by its proposed joint venture company - True Value Hotels India - be transferred to the Project Approval Board (PAB) for consideration.

The Indian investee company, True Value Hotel India Pvt Ltd, is proposed to be a joint venture between Eminence Conbuild Private Ltd (a group company of Emmar MGF Land Pvt Ltd) and Premier Travel Inn India Ltd, UK, for development, operation and maintenance of budget hotels in India under the brand name ‘Premier Travel Inn’.

Jt venture equity

The equity of the joint venture company is proposed to be held in the ratio of 49.9 per cent by Premier Travel Inn India Ltd, UK, and 50.1 per cent by Eminence Conbuild Pvt Ltd.

Premier Travel Inn India Ltd is part of the Whitbread Group PLC group of companies and is into the operation of chain of budget hotels under the brand “Premier Travel Inn”.

The FIPB approval is being sought to permit True Value Hotels India to pay a monthly franchisee fee equal to two per cent of the gross revenue, to the franchisor (Premier Travel Inn India), and a monthly marketing fee of up to one per cent of the gross revenue to Premier Travel Inn Ltd (a group company of the franchisor) for costs and expenses associated with international marketing and advertising activities and programming to the limited services hotels to be developed and operated by the franchisee in India.

The monthly franchisee fee is in consideration for enabling the franchisee to use the know-how, technology and proprietary information of the franchisor and its affiliates. The joint venture company had consented to the payment of the franchisee fee at the proposed rate.

FDI norms

As per the existing norms, FDI up to 100 per cent is allowed in the hotel and tourism sector under the automatic route. Moreover, where the franchisee fee was concerned, the Press Note 2 of 2000 along with Press Note 1 of 1995 permitted up to three per cent of the net turnover under the automatic route, for franchising and marketing/publicity support fee.

Sources said that the Department of Industrial Promotion & Policy had pointed out that the proposal was only for payment for franchisee fee and, therefore, may be transferred to the PAB for consideration.

The FIPB discussed and agreed that in cases where a proposal entailed technical collaboration or payment of royalty or franchise fee without accompanying proposal of foreign equity inflow (which requires FIPB nod), such proposals could be remitted to PAB for consideration.

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