New Delhi, Sept. 20: The government today granted Coca-Cola India an extension of six months till February 2003 to divest up to 49 per cent equity in Hindustan Coca Cola Beverages Ltd, the company’s bottling arm.
The extension has been granted following a representation from Coke that outlined the cola maker’s commitment to comply with the divestment conditions no later than February 28, 2003.
The official statement from the government said, “In view of the fact that Hindustan Coca-Cola Holdings Pvt Ltd has agreed to comply with the divestment condition, the government, after taking into consideration the steps taken and proposed to be taken by the company to implement the divestment condition, extended the time for fulfilment of the divestment condition from August 16, 2002 to February 28, 2003.”
The company has proposed to divest around 39 per cent of its equity holdings in its wholly-owned subsidiary, Hindustan Coca-Cola Beverages (HCCB), to private investors and business partners and the remaining 10 per cent in favour of local resident Indian employee welfare and stock option trusts.
The divestment in favour of employees and business partners is proposed to be completed by October 17 this year and the rest by February 17-28 next year, says the official statement issued by the government.
The statement clarified that as per existing conditions Indian participation can be in the form of participation by individuals/joint venture partners or general public or both. This puts to rest speculations that an exemption from an IPO was granted to Coca-Cola following pressure from the US-based headquarters of the cola giant.
The Coca-Cola spokesperson said, “We announced our divestment programme on August 16 this year. The process of divestment is on and it will be completed within the stipulated period.” The stipulated period in question here is the February-end deadline.
However, the spokesperson refused to say in what proportion the 39 per cent equity holding would be divided among the business partners—Coke’s bottling franchisees and suppliers—and the private investors.
As per the approval granted to Coca-Cola on August 17, 1997, Hindustan Coca-Cola Holdings Private Limited (the Indian arm of the Coca-Cola company) was required to divest 49 per cent of its downstream venture to Indian residents over a period of five years, i.e by July 16, 2002.
The company had made several representations for deleting the divestment condition. These were considered twice by the government by the government in 1997 and rejected. It was also rejected twice by the Foreign Investment Promotion Board (FIPB) at its meetings in December 2000 and October 2001. Coke’s further representation to the government in April this year was also rejected.