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Coke gets 6 months to fulfill divestment condition

The government said that it has granted US giant Coca-Cola another six months till Feburary 2003 to divest upto 49 per cent equity in its Indian arm following a representation by the company committing to comply with the divestment condition.

"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 various issues, extended the time for fulfillment of the divestment condition from August 16, 2002 to February 28 2003," an official statement said.

Amidst media reports that Hindustan Coca-Cola Holdings was given an exemption from making a public offer as part of stipulated divestment due to pressure from the US, the government 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".

The company proposes to divest 39 per cent of its equity to private investors and business partners by October 17, 2002 and the balance 10 per cent in favour of local resident Indian employees' welfare and stock option trusts by February 28, 2003.

Representations made by the company for deletion of the divestment condition were considered twice by the government in 1997 and twice by the Foreign Investment Promotion Board at its meeting in December 12, 2000 and October 4, 2001. The proposals were rejected on all these occasions.

The company made yet another representation in April, 2002, which was also rejected by the department, it said.

However, the government granted one month's extension to the submission that the company filed on June 6, 2002.

"In response, the company submitted a detailed representation outlining the steps set in motion and giving its firm commitment to comply with the divestment condition by not later than February 28, 2003," the statement said.

The mandatory divestment clause was included in the approval granted to Coke's Indian arm Hindustan Coca-Cola Holdings Pvt Ltd way back in 1997.

As per the condition, the company was required to divest up to 49 per cent equity over a period of five years. The company had however been seeking relaxation in the period citing adverse market conditions. It had also contended that the condition was discriminatory since the same was not made applicable for its rival company Pepsi.

The company in its various applications before the FIPB also cited instances of other companies in which the government had relaxed the time period to fulfill the mandatory divestment clause.

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