The Hindu Business Line : PepsiCo seeks to change terms for franchisee buy

WITH the Coca-Cola disinvestment issue still hanging fire, it now seems to be the turn of the other soft drink multinational, PepsiCo, to join the bandwagon against decisions taken by the Foreign Investment Promotion Board (FIPB).

PepsiCo has moved the FIPB seeking changes in the terms and conditions approved by the board for acquiring the assets and business areas of its franchisee, Dhillon Kool Drinks and Beverages Ltd (DKDBL).

Declining to go by the condition imposed by the FIPB, which stated that only foreign direct investment (FDI) funds should be used for the acquisition, the company, in a letter to the FIPB, has stated that it will be using cash accruals along with FDI already received by it for the proposed acquisition.

PepsiCo has asked the FIPB to make necessary changes and amend the terms and allow it to use cash accruals for the said acquisition.

Last month, the FIPB directed PepsiCo India Holdings Ltd to use only FDI funds and categorically stated that the company should not resort to domestic debts to fund the acquisition. The board had also told the company that post-acquisition, it will have to discharge all the statutory liabilities of DKDBL and that the existing employees of DKDBL must be given their legal due and fair treatment.

The board also said that it would have to divest 49 per cent equity in the company in favour of Indian shareholders within a period of five years from the date of acquisition.

On this issue, PepsiCo has said, "We would, however, like to point out that in the permission letter released to us, we have been asked to dilute our holding to 51 per cent in DKDBL as against Aradhana Soft Drink Company (ASDC), which is the company acquiring the assets from DKDBL. We are not acquiring equity shares of DKDBL, so the question of diluting our holding in that company does not arise."

The company has asked the FIPB to incorporate the changes and amend this condition also.

PepsiCo had moved the FIPB in December 2002 seeking permission to buy out DKDBL's operations in Haryana and Himachal Pradesh.

Currently, PepsiCo's total holding in DKDBL stands at 26 per cent of which 24 per cent is held by Aradhana Beverages & Foods Company Pvt Ltd, a wholly-owned subsidiary of Pepsico India Holdings.

As per the company's plans, the acquisition will be made through Aradhana Beverages and not through PepsiCo India Holdings, which will continue to hold two per cent stake in the company.

The condition on mandatory disinvestment of 49 per cent stake in downstream companies is in compliance with the company's agreement with the Government in December 1997.

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