Coca-Cola knocks on FIPB doors to keep Indian ops bubbling
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In order to continue the flow of investments from its parent firm to India operations, the Indian arm of beverage giant Coca-Cola is knocking on the doors of Foreign Investment Promotion Board (FIPB) to extend the date for redemption of preference shares (from 2012 to 2019) that was allotted by Hindustan Coca-Cola Beverages (HCCB), the manufacturing and distribution arm of Coca-Cola India (downstream subsidiary), to Hindustan Coca-Cola Holding (HCCH), the holding arm, in March 2005.
The preference shares worth around R804 crore, allotted by HCCB to HCCH, lapsed in March 2012. The amount was part of the R3,254-crore foreign direct investment in HCCH approved by the government in late 1990s.
HCCB said the approval is required so that it continues to invest in the resources and capabilities required to meet the company's 2020 vision for India. Last year, the US-based Coca-Cola Company had announced scaling its India investments to $5 billion by 2020. The subsidiary of Coca-Cola in India wants the government to extend the date for redemption of these preference shares by seven years ó from March 2012 to March 2019 ó by amending the terms of its earlier approval letter issued in 2003.
The proposal comes for consideration before FIPB on January 18. FIPB is the nodal agency dealing with the matters of foreign direct investments entering India. The application of HCCB was filed in late November last year after deliberations with the FIPB and the department of industrial policy and promotions (DIPP) since the beginning of 2012.
As per the application, HCCH has been in touch with the FIPB since January 2012 and has written to the board on several occasions between January and September 2012.
Sources said DIPP in its earlier correspondence with HCCH said since the government had already given an approval for issuing preference shares in January and August 2003, the company will require an amendment in that original approval letter. As per the terms of that letter issued in 2003, the preference shares issued by HCCB to HCCH would be redeemed after seven years from the date of allotment.