Financial Daily from THE HINDU group of publications
Saturday, Jan 04, 2003
Financial Daily from THE HINDU group of publications Saturday, Jan 04, 2003 |
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Corporate
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Mergers & Acquisitions Readers Digest sale stuck over royalty Poornima Mohandas
MUMBAI, Jan. 3 ROYALTY payment to the US parent is believed to be the main issue holding up the Tatas' plan to sell the Indian Reader's Digest to the Living Media group. Indian Reader's Digest is published by RDI Print & Publishing Ltd (a 100 per cent Tata owned company) under a licence granted by the US-based Reader's Digest Association Inc. According to sources, Reader's Digest Association Inc is demanding a royalty of close to 12 per cent of the annual turnover from the Living Media group, the media house which owns the India Today and the `Aaj Tak' television channel amongst others. The royalty figure demanded, for the publication with a circulation of close to 5.05 lakh, could not be confirmed. Officials involved in the negotiations said `several issues including royalty payment would have to be sorted out, before concluding the agreement'. Currently, the Tatas pay five per cent of sales turnover as royalty to Reader's Digest Association Inc, which holds the copyright, trademark and dictates editorial content and policies for the Indian edition. Explaining the reasons for the delay in the sale, officials said the royalty agreement being negotiated is for 10 years and requires Government approval. Talking to Business Line, Mr Sanjay Johri, Managing Director, RDI Print & Publishing, said the deal was expected to be completed by March 2003. News reports on the sell-out of the Tatas to the Living Media group have figured since early last year. The sale of the business from the Tatas to the Living Media group involves the entire publishing enterprise which includes the brand name, database, subscription list, ad contracts, staff, office space and receivables of the organisation. Mr Johri confirmed there would be no retrenchment in the organisation post-take-over according to the agreement in the company, which employs a lean staff of 57 and has a turnover of Rs 25 crore. Apart from the publishing business, RDI Print & Publishing also has an investment business which would not be part of the sale. The investments with a book value of close to Rs 50 crore include shareholding in several Tata companies and real estate. The net profit of Reader's Digest in India for March 2002 was close to Rs 4 crore with Rs 14 crore income from circulation and Rs 7 crore from advertising revenue. Reader's Digest has had a `cordial' 25-year-old relationship with the Living Media group. The group's Thomson Press prints the monthly for India and Nepal. The exit of the Tatas from Reader's Digest is in line with the group's strategy of exiting from non-core businesses as it did in the case of Tomco, Merrind, Lakme to name a few. The Tatas had bought 100 per cent stake in Reader's Digest back in 1979 for a `paltry' sum of Rs 1.5 lakh, equivalent to the then paid-up capital of the company, at a time when many foreign companies were exiting India to comply with the Foreign Exchange Regulation Act.
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