Bonfiglioli Transmissions Limited pays promoter 6% royalty

Bonfiglioli Transmissions Limited pays corporate promoter Bonfiglioli S.p.A. a royalty equal to 6% of yearly net sales for licensed products, under an agreement effective from January 1, 2021. Bonfiglioli Transmissions also pays separately determined group-service fees that typically recover 30% to 100% of service costs plus a 5% arm’s-length mark-up.

What does Bonfiglioli Transmissions’ 6% sales royalty cover?

Bonfiglioli Transmissions’ 6% sales royalty pays for a limited licence to manufacture and sell specified products using Bonfiglioli S.p.A.’s intellectual property. The June 1, 2021 License Agreement, effective from January 1, 2021, covers the Bonfiglioli trade name, trademarks, patents, drawings, utility models, design rights and product-related know-how. The licence is non-exclusive, non-transferable and non-sublicensable.

The royalty is calculated on yearly net sales, excluding intercompany sales to Bonfiglioli S.p.A. and after discounts and incentives. Therefore, the disclosed 6% rate is not a percentage of all gross sales recorded by Bonfiglioli Transmissions. The Draft Red Herring Prospectus does not disclose the annual rupee value of the royalty, licensed-product sales, or the share of revenue that falls within the royalty base.

Bonfiglioli Transmissions can use the licensed intellectual property in India, Pakistan, Bangladesh, Sri Lanka and Nepal. Manufacturing or sales in any other country require Bonfiglioli S.p.A.’s consent. The territorial limit means the right to sell licensed products outside the five specified countries is conditional on a further promoter approval rather than included automatically in the agreement.

How are Bonfiglioli Transmissions’ promoter service fees calculated?

Bonfiglioli Transmissions pays service fees under the Intercompany Service Agreement, or ISA, dated January 1, 2024, through a mechanism that typically recovers 30% to 100% of service costs plus a 5% arm’s-length mark-up. Arm’s length refers to a price intended to reflect terms between independent parties. Fees are determined using fixed costs or turnover net of taxes and invoiced quarterly against estimated annual fees.

The ISA differs from the royalty because it does not set one fixed percentage of Bonfiglioli Transmissions’ sales. The 6% royalty applies to the defined yearly net sales base, while the ISA charge can depend on service costs and the selected fixed-cost or turnover method. The filing does not state the rupee amount invoiced under the ISA in any financial year.

Bonfiglioli S.p.A. can deliver ISA services through its own resources, other Bonfiglioli Group entities, or third-party providers, and can enter necessary intragroup or third-party contracts to provide them. The covered corporate services include information technology, human capital and resources, legal and corporate affairs, administration and finance, strategic purchasing, quality, health, safety, engineering, communications and aftersales.

The ISA also covers business-unit services for industry and automation solutions, as well as mobility and wind industries. These services include general management, product marketing, customer experience, pricing, project and product-launch support, sales and business development, manufacturing operations and purchasing. The agreement specifically includes support for optimisation of global supply-chain management in industry and automation solutions.

How long can the royalty and service arrangements continue?

Bonfiglioli Transmissions’ royalty and group-service arrangements each have one-year terms that renew automatically, although the required termination notices differ. The License Agreement renews for successive one-year periods unless either party gives at least three months’ notice before the end of the financial year. The ISA renews for successive one-year periods unless terminated with at least 30 days’ notice before year-end.

The annual renewal mechanism makes the agreements recurring contracts, not permanent transfers of intellectual property or service functions. For the 6% royalty to continue under the disclosed terms, the licence must remain in force and Bonfiglioli Transmissions must record qualifying yearly net sales. For ISA fees to continue, services must be provided and charged through the fixed-cost or turnover methodology specified in the January 1, 2024 agreement.

Bonfiglioli S.p.A. is both the licensor and service provider, as well as the holding company and one of the corporate promoters of Bonfiglioli Transmissions. BON-FI S.r.l. is the holding company of Bonfiglioli S.p.A. The disclosed ownership and contractual roles place the brand licence and group-support charges within the same promoter relationship.

What does the filing show about Bonfiglioli Transmissions’ group dependence?

Bonfiglioli Transmissions depends contractually on Bonfiglioli S.p.A. for the disclosed right to use the Bonfiglioli brand and specified intellectual property, and for access to defined corporate and business-unit services. The 6% royalty and ISA fees have different charging bases, but both are recurring payments to the corporate promoter under agreements with annual renewal provisions.

The filing does not quantify the proportion of Bonfiglioli Transmissions’ products made under the licence, the portion of operations using ISA services, or the annual cash cost of either arrangement. It also states that Bonfiglioli Transmissions had no subsidiaries, associates or joint ventures as of the Draft Red Herring Prospectus date. That status does not change the direct agreements with Bonfiglioli S.p.A. and, in the ISA, other Bonfiglioli Group entities.

The group relationship has also included business transfers separate from the royalty and service arrangements. On September 30, 2024, Bonfiglioli Transmissions sold its global capability centre business to Bonfiglioli Technology Space Private Limited for Rs 11.55 crore through a slump sale, meaning a sale of a business undertaking as a going concern. The transferred business included engineering design, information-technology support, accounting, finance and consolidation services.

On December 15, 2025, Bonfiglioli Transmissions acquired the manufacturing and sale of a gear-components division from Bonfiglioli Drive Solutions Private Limited for Rs 21.44 crore through another slump sale. Bonfiglioli S.p.A. is identified as promoter of both Bonfiglioli Technology Space Private Limited and Bonfiglioli Drive Solutions Private Limited. These transfers involved operating activities, whereas the royalty and ISA govern ongoing use of intellectual property and group support.

Conclusion

Bonfiglioli Transmissions’ disclosed promoter charges combine a 6% royalty on defined yearly net sales with service fees that typically recover 30% to 100% of relevant costs and add a 5% arm’s-length mark-up. The royalty provides rights to manufacture and sell specified products under Bonfiglioli intellectual property, while the ISA provides a separate route to corporate and business-unit support.

The next disclosed points to watch are the respective renewal and termination processes: three months’ notice before financial year-end for the License Agreement and 30 days’ notice before year-end for the ISA. The filing leaves unresolved the annual rupee payments, qualifying licensed-product sales and the extent to which Bonfiglioli Transmissions’ operations use the services covered by the January 1, 2024 ISA.