Coca-Cola plans to raise $41 million or about Rs 200 crore (Rs 2 billion) at face value by divesting 49 per cent stake in wholly-owned subsidiary Hindustan Coca-Cola Beverages Pvt Limited.
This divestment of 49 per cent equity could mean repatriating over Rs 1600 crore (Rs 16 billion) of Foreign Direct Investment Coke has brought to the country since its equity investment stands at about Rs 3,307 crore (Rs 33.07 billion).
Coke has to complete the divestment process by February 28 and has already offloaded 10 per cent stake in favour of employee trusts and as part of employee stock option schemes, a senior company official said in New Delhi.
Sunil Gupta, vice-president (external) declined to comment further on the divestment, as per a letter written by the company to the Prime Minister's Office earlier, "enforcement of the 49 per cent divestment condition can in principle result in a repatriation of over Rs 1600 crore (Rs 16 billion) of FDI."
"Divesting these shares at a premium will significantly increase the quantum of that capital repatriation," it added.
While 10 per cent stake has already been divested, the remaining 39 per cent stake would be divested to private investors and bottlers.
Hindustan Coca-Cola Holdings, which owns and operates 26 plants and 60 distribution centres, is expected to complete the divestment process by the deadline of Feruary 28.
It may be recalled that the company has invested over Rs 3,200 crore (Rs 31 billion) in Indian operations in its eight-year stint but has made cash profits only in 2001, with net profit still awaited.
ICICI Securities and ABN Amro Corporate Finance have been advising Coke on the divestment and in identifying potential investors while law firm Amarchand Mangaldas has been retained as legal advisors to the issue.
The decision to divest was arrived at after government turned down repeated pleas of the company to either exempt it from divestment or allow a five-year moratorium on the ground of poor financial health and adverse market conditions.