PepsiCo's plea for waiving off the mandatory 49% divestment in its Indian bottling arms has finally been approved by the Cabinet Committee on Economic Affairs (CCEA). The CCEA has also cleared the way for PepsiCo India Holdings Ltd to bring in additional foreign equity investments of $50 million (about Rs 250 crore). PepsiCo's proposal was considered by FIPB thrice before it finally got an approval.
In 1997, beverage giants, Pepsi and Coca-Cola were allowed to set up holding companies in India on the condition that their subsidiary companies would have to divest their equity to the Indian partners within the first 5 years of operation, the disinvestment deadline being 2002. However, the policy underwent a liberalisation in 2000, allowing 100% foreign direct investment (FDI) in the food processing sector. Citing the change in the policy, PepsiCo pleaded for the waiver of the 49% divestment. Consequently, the deadline of 2002 was extended.
Coca-Cola, however managed to comply with the condition of divestment immediately as it sold 49% in its bottling subsidiary, Hindustan Coca-Cola Beverages to strategic investors, bottlers and employees in 1997 itself. Eight years later, Coca-Cola bought back its shares to take control of the bottling operations.
Ravi K Jaipuria, one of the largest Pepsi bottlers in India, invested Rs 100 crore in the company in October this year to raise capacities in the existing plants as well as to set up a new bottling plant. The Jaipuria group collectively forms about 45% of Pepsi's total franchisee business.