The company is engaged in the manufacture of rifampicin bulk drug and its intermediates (Rifas and 3-Formuylrifamycin SV). The company had taken Government approval for paying a royalty of 5 per cent, subject to taxes for a period of seven years during the period of the agreement. Of this, 4 per cent is to be paid to its technical collaborator Chong Kun Dang Corporation of Korea and 1 per cent to Ciba Geigy of Switzerland. Ciba-CKD Biochem has entered into a technical transfer agreement with the Korean company and a technical assistance, engineering services and training agreement with Novartis AG, formerly Ciba Geigy of Basle. The technical transfer agreement (TTA) was signed in 1995, while the technical assistance agreement in 1996.

The company recently forwarded all documents related to the agreement to the Government. The company has stated that the commercial production started in March 1998 and the Government approval allows royalty payment for seven years from the commencement of production that is till March 2005. The TTA and the technical assistance agreement are valid for 10 years from the date of the agreement or seven years from the date of commencement of commercial production.

The company sought an extension in the period during which royalty may be paid up to March 2006. Besides royalty, the company also has to make a lump sum payment which is in the form of a technical knowhow fee of Rs 2.55 crore, subject to taxes. The approval is subject to the existing drug policy for manufacture of rifampicin. The company had taken approval for foreign equity of 11,19,000 equity shares of Rs 10 each at an appropriate price for foreign institutional investors, OCBs and other foreign entities with a cap that interim FDI before public issue will be 62.18 per cent. The FDI after the public issue will be 46.65 per cent as against 46.45 per cent.

Sources said that the Foreign Investment Promotion Board noted that the extension in the period of payment of royalty by a period of two years was on account of the fact that for the first two years of the technology transfer agreement, it could not be paid owing to low profits or losses.