Cotton spinning machinery manufacturer Lakshmi Machine Works Limited (LMW) throws a spanner in Swiss partner's India works.
This may be the first major battle between an MNC and a domestic firm for the share of India's booming textile machinery market after scrapping of the controversial Press Note 18 norms.
Press Note 18 was subsequently rechristened as Press Note 1 (2005 series) with modifications. South-based Lakshmi Machine Works (LMW), the largest Indian textile machinery manufacturer, has now invoked Press Note 1 to check its Swiss partner, Rieter's Indian ambitions.
LMW, in a representation to the government, has said that Rieter's proposal to manufacture textile spinning machinery “would affect LMW adversely.” It has invoked provisions of Press Note 1 as Rieter still holds over 13% equity stake in LMW. Rieter had sought the government's nod to expand the activities of its wholly-owned subsidiary, Suessen India.
While informing the Foreign Investment Promotion Board (FIPB) about Rieter's existing partnership with LMW, the Department of Heavy Industry (DHI) endorsed invoking of the Press Note 1 norms in this case. It asked Suessen to obtain a no objection certificate (NOC) from LMW as the foreign investor's stake in the existing JV was higher than 3%.
Press Note 1 allows foreign investors to set up new ventures without the government's prior permission (automatic route), despite having previous joint ventures in the same or allied fields. However, prior approval of the government is required “in cases where the foreign investor has an existing JV or technology transfer/trademark agreement in the same field.”
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