Bhartias seeks Rs 12,500 cr funding to acquire Coca-Cola bottling stake

The Bhartia brothers are seeking to raise Rs 12,500 crore for a 40 per cent stake in Hindustan Coca-Cola Beverages, while talks are underway with asset managers and banks to secure the funding

The Bhartia brothers, Shyam and Hari, promoters of Jubilant Bhartia Group, are in talks with alternative asset managers, mutual funds, and international banks to raise up to Rs 12,500 crore for acquiring a 40 per cent stake in Hindustan Coca-Cola Beverages (HCCB). This acquisition, involving Coca-Cola’s Indian bottling subsidiary, could mark the largest investment for the group’s diversified businesses, which range from food to pharmaceuticals, according to a report by The Economic Times.

Discussions are underway with firms like Apollo Global Management, Ares Management, Bain Capital, and Kotak Alternate Asset Managers to secure around Rs 4,000-Rs 5,000 crore, the news report said.

The financial arrangement under consideration involves a structured instrument, likely a compulsorily convertible preference share or a convertible debenture, with tenure of three years and a minimum return guarantee.

Coca-Cola’s listing plans

Coca-Cola’s plans to list HCCB, following the asset-light model adopted by rival PepsiCo, are seen as a critical factor in the deal. The stake sale is expected to assist with price discovery ahead of an IPO of HCCB, which could take place in the coming years, the report mentioned.

If treated as a quasi-equity instrument, the terms of this deal may not include a coupon, unlike traditional debt transactions. Additionally, the agreement is unlikely to involve any security tied to shares of the group’s listed entities, such as Jubilant Foodworks.

The Bhartias had been selected by Coca-Cola, surpassing a competing bid from the Burman family of Dabur, to collaborate in their bottling operations in India, which have been expanding due to increased beverage consumption, including colas. The two parties have since signed an exclusivity agreement for bilateral negotiations, according to the report.

Meanwhile, discussions are also in progress to secure a three- to five-year debt tranche from mutual funds. Morgan Stanley, acting exclusively for the Bhartia family, is leading these efforts. The Wall Street bank also served as the buy-side advisor in the negotiations. The plan involves creating a special purpose vehicle, which will hold a 40 per cent equity stake in HCCB.

Competition heats up in non-alco-bev sector

Competition in the alcoholic beverages (alco-bev) sector has intensified recently, driven by Reliance Consumer Products Ltd (RCPL), which has disrupted the market with competitive pricing, higher trade margins, and expanded distribution for its Campa brand. RCPL is offering 200 ml Campa bottles for Rs 10, while Coca-Cola and PepsiCo sell their 250 ml bottles at Rs 20. Additionally, Campa’s 500 ml bottles are priced at Rs 20, considerably cheaper than the Rs 30 and Rs 40 charged by Coca-Cola and PepsiCo for the same size.

PepsiCo’s bottling partner, Varun Beverages Ltd, announced plans earlier this month to raise Rs 7,500 crore through Qualified Institutional Placement (QIP) to support its growth initiatives. Meanwhile, Hindustan Coca-Cola Beverages is preparing a $1.5 billion capital expenditure programme over five years to invest in new bottling lines and chillers. Although Coca-Cola and PepsiCo have not directly reduced prices, they have ramped up tactical promotions, such as cross-promotions and bundling deals, particularly through local retailers and quick commerce platforms, the report said.