Coca-Cola sells 40% stake in HCCB to Jubilant Bhartia Group
Coca-Cola Co. sold 40 per cent of its stake in Hindustan Coca-Cola Holdings Pvt Ltd to Jubilant Bhartia Group, reported PTI.
The Jubilant Bhartia Group, which operates India's largest food services business, will acquire a 40% stake in the country's largest Coca-Cola bottler, in a transaction said to be valued between ₹12,000 crore and ₹12,500 crore.
In India, The Coca-Cola Co. bottles products such as Thums-Up, Sprite, Fanta, Limca and flagship brand Coca-Cola through subsidiary Hindustan Coca-Cola Beverages Pvt. Ltd (HCCB), as well as a set of independent bottling companies. Jubilant Bhartia Group will acquire 40% in Hindustan Coca-Cola Holdings, the parent of HCCB, through Jubilant Beverages Ltd. HCCB operates 13 factories, serving 236 districts across 12 states in India's south and west.
Coca-Cola struck the deal with a “long-term” view of picking a partner which has capabilities in running reputed businesses in India, a person familiar with the development said. Goldman Sachs is financing a part of the deal, and the ultimate aim is to take the bottling business public, the person said on the condition of anonymity.
The Jubilant Bhartia Group, which started out as a drugs and chemicals company, has since branched into contract research and development services, agricultural products, performance polymers, and food services. Jubilant FoodWorks Ltd is India’s largest food services company, and holds exclusive rights to develop and operate Domino’s Pizza in India, Sri Lanka, Bangladesh and Nepal.
The acquisition underscores Jubilant’s belief in the long-term growth potential of the country’s food and beverages industry, Shyam S. Bhartia, founder and chairman; and Hari S. Bhartia, founder and co-chairman of the Jubilant Bhartia Group said in a statement on Wednesday.
“Our deep understanding of the Indian market, combined with The Coca-Cola Company’s global perspective, will further enhance HCCB’s value and accelerate its impressive growth trajectory,” the founders said. It “aligns with our strategic intent to expand and diversify into high-growth industries.”
Analysts tracking the sector said the deal is likely to intensify competition in the business of packaging beverages.
"We expect competition to Varun Beverages to potentially go up due to this development, as Jubilant Group has shown strong execution capabilities via Jubilant Foods. In any case, with the entry of Reliance Industries via Campa Cola, as we have been highlighting, competition in this sector will gradually go up as it is a large industry with only two large players. Also, this industry has high margins, which gives ability for a player to turn aggressive in order to take market share," said Abneesh Roy, executive director, Nuvama Institutional Equities.
India is the fifth largest market for Coca-Cola globally, a market it re-entered in the 1990s. The country's carbonated drinks industry generated over $18 billion in revenue in 2022, a report by think tank ICRIER showed. Year-round hot and humid weather creates a large beverage market in India.
“With its diverse experience in various sectors, Jubilant brings decades of rich experience that will help accelerate the Coca‑Cola system, enabling us to win in the market and provide greater value to local communities and consumers,” said Sanket Ray, president of the Coca-Cola India & Southwest Asia operating unit.
HCCB's consolidated revenue from operations rose 10% to touch ₹14,021.54 crore in FY24, while net profit jumped 246% to ₹2,808.3 crore, data from business intelligence platform Tofler showed.
For Coca-Cola, this announcement is part of its efforts to streamline bottling operations in India through HCCB. Apart from HCCB, beverages company works with 11 large bottlers across India. Rival PepsiCo too has outsourced bottling operations in India to publicly listed Varun Beverages Ltd.
Last year, John Murphy, president and chief financial officer at Coca-Cola, told reporters at a roundtable in Lucknow that the company will continue to divest bottling operations in the country in a "thoughtful" and "deliberate" manner. Earlier this year, HCCB sold bottling operations in Rajasthan, Bihar, the northeast, and parts of West Bengal to independent bottlers. This move, along with the 2019 sale of operations in north India, aims to optimize the supply chain, expand distribution, and enhance execution.
HCCB has been increasing capacity in India, announcing plans earlier this year to set up new plants in Telangana and Maharashtra. In December, it announced plans to invest ₹3,000 crore to set up a juice and aerated drinks facility in Gujarat.
Shardul Amarchand Mangaldas & Co acted as the legal counsel for the transaction, while Morgan Stanley worked as the exclusive financial advisor for Jubilant Bhartia Group. Rothschild & Co acted as exclusive financial adviser to The Coca‑Cola Co.
Disclaimer: The promoters of HT Media Ltd, which publishes Mint, and Jubilant Bhartia Group are closely related. There are, however, no promoter cross-holdings.
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First Published:11 Dec 2024, 03:17 PM IST
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