NEW
DELHI: Coca-cola India’s proposal to issue shares with differential
voting rights to local shareholders in one of its domestic subsidiaries
as part of disinvestment has now been referred to the Cabinet.
As
part of the original entry level conditions imposed on the soft drinks
major in 1997, the company had to divest upto 49% of the equity of its
downstream subsidiary, Hindustan Coca-Cola Beverages, to domestic shareholders.
Although the government agreed earlier this year to allow the company
to privately place its equity to local investors, instead of going in
for a public offering, its proposal to issue shares with non-voting
rights in the process has run into resistance.
According
to senior government officials, the Foreign Investment Promotion Board
has decided to refer the issue to the Cabinet as the original approval
for Coke’s investment and disinvestment was given by the Cabinet Committee
on Foreign Investment (CCFI). The Coke differential voting rights proposal
is now expected to be considered by the Cabinet Committee on Economic
Affairs which now looks into such issues, replacing the CCFI. “Since
the original approval was given by the Cabinet Committee, the competent
authority to consider any changes will have to be the Cabinet,” a senior
official said.
Coke
on its part has protested to the government saying that “new, substantive
and onerous” conditions being imposed upon the company was not part
of the original approval condition. It has pointed out how a similar
condition was not imposed on the downstream subsidiaries of NBFCs which
also had to disinvest to domestic shareholders as per their original
approvals.
Coke
had also sought to restructure its capital. It had earlier sought approval
from the government to use Rs 830 crore invested by Hindustan Coca Cola
Holding lying as unused balance in the advance against shares capital
account of Hindustan Coca Cola Beverages for purchase of redeemable
non-cumulative non-participating preference shares.
Government
officials said that they did not anticipate any problems on account
of the issue of preference shares given that it would fit in with the
guidelines on issuance of preference shares by overseas investors. And
if the preference shares offer zero coupon rates, the issue of preference
shareholders obtaining voting rights in the potential event of defaulting
on dividend payment would not arise, they said.
SHAJI
VIKRAMAN & CHAITALI CHAKRAVARTY
TIMES
NEWS NETWORK
[ WEDNESDAY,
MARCH 26, 2003 05:06:16 AM ]
