INDIA BUSINESS WORLD - FEBRUARY 1^st - FEBRUARY 15^th - 2008

COKE’S RS 200-CR FDI PLAN REFERRED TO CCEA

A proposal from American giant Coca-Cola’s Indian subsidiary to invest an additional Rs 200 crore ($52 million) in local operations has been referred to the Cabinet Committee on Economic Affairs (CCEA). The proposal was cleared by Foreign Investment Promotion Board (FIPB) recently and has been referred to CCEA after approval from finance minister P Chidambaram. The additional capital infusion into Hindustan Coca-Cola Holdings (HCCH) is also being accompanied by increase in authorised capital of the Indian arm to Rs 4,500 crore as compared to Rs 2,700 crore. The hike in authorised capital of HCCH would happen by March this year, the company has informed the FIPB. HCCH already has approval for bringing in foreign direct investment of $947 million. Once the current application is cleared, Coke’s investment in India would cross the $1-billion mark. The initial FDI clearance for Coke’s Indian operations was cleared by the CCEA since the amount exceeded Rs 600 crore. Therefore, the FIPB has recommended that the plea for bringing in another Rs 200 crore should be referred to the Cabinet panel.

HCCH has already brought in the additional FDI through ‘advance’ toward share capital. As a result, its share capital has increased to Rs 3,838 crore. According to RBI rules, shares against advance have to be issued within 180 days of receiving the advance money. Therefore, the company has committed that it would enlarge its authorised capital and issue shares against advance before the end of March. The CCEA is expected to take up the Coca-Cola plea soon and no complications are foreseen in clearance, government sources said. HCCH plans to use the additional FDI to infuse funds into its subsidiary Hindustan Coca Cola Beverages (HCCB). The company has already submitted a board resolution to back its plan for expanding its capital base and infusing fresh FDI. HCCH’s plea for enhancing its FDI approval was supported by both finance and food processing ministries, officials said.