Foreign Investment and Promotion Board(FIPB) has put a spoke in liquor major Pernod Ricard's plans to merge United Agencies (UAL) with Seagram India.
Pernod group - which acquired Seagram's Canadian parent in '01- had proposed to buy out the 26% stake of its local partner in UAL and consequently merge it with Seagram India to consolidate its Indian operations.
Pernod already had an Indian presence with UAL as a joint venture before it acquired Seagram India as a part of global deal which had resulted in two separate entities for the company in the country. Pernod had argued that, UAL being a smaller entity, is unlikely to become viable on a stand alone basis.
The FIPB rejected the proposal on the ground that, as per the existing policy 100% foreign equity in potable liquor venture is not permissible.
Foreign investment is allowed only in a JV with Indian companies having IDR Act Licence and financial stake. The issue is also pending the decision of the Supreme Court on IDR Act provisions.
Incidentally, 100% FDI is permitted in the liquor sector provided servicing of licence in the name of the surviving entity will be required.
Pernod had entered India by acquiring 74% stake in the Shrikant Ruparel owned United Agencies.
The rest of the holding lay with High Grade Securities, an Indian company.
While Pernod had introduced two brands through UAL -- Santiago India's first dark Cuban rum and Tilsbury a pure grain whisky -- it had decided to discontinue the two brands and focus on Seagram's portfolio of liquor brands including 100 Pipers and Something Special.
The French liquor company was planning to take the Mauritius route to acquire the Indian shareholders stake through its wholly owned subsidiary Peri Mauritius.
Pernod had picked up the 10% stake in Seagram India held by its former Asia Pacific head Ramesh Vangal of the Scandent Group which converted Seagram into a wholly owned subsidiary of Pernod.
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