Bhartia family, Goldman Sachs in talks for 40% stake in Coca-Cola Beverages

The Bhartia family and Goldman Sachs aim to co-invest in a 40 per cent stake in Hindustan Coca-Cola Beverages, backing an SPV with around Rs 3,000-Rs 3,500 crore in funding

The Bhartia family, led by Shyam and Hari Bhartia of the Jubilant Group, is in advanced discussions with Goldman Sachs to co-invest in a 40 per cent stake in Hindustan Coca-Cola Beverages (HCCB). This acquisition would secure a significant share in Coca-Cola’s wholly-owned bottling operation in India, the company’s fifth-largest global market, according to a report by The Economic Times.

 

Goldman Sachs is set to finance the deal via a Special Purpose Vehicle (SPV), injecting around Rs 3,000-Rs 3,500 crore through a convertible preferred equity structure. The Bhartia family is expected to contribute a similar amount to the acquisition, the report said.

 

 

The Wall Street firm will channel its investment through its Goldman Sachs Alternatives unit, which spans growth and private equity, hedge fund, real estate, and private credit investments.

Deal terms and exit strategy

Goldman Sachs has agreed to a 20 per cent internal rate of return (IRR) cap on returns, offering some downside protection. The investment structure involves compulsory convertible preference shares, intended to be converted during HCCB’s expected IPO within the next 2-3 years. The IPO will follow a waterfall repayment structure, prioritising senior secured lenders, with Goldman Sachs positioned between the debt and Bhartia family equity stakes, the report said.

Coca-Cola’s asset-light strategy

Coca-Cola India plans to emulate PepsiCo’s model of asset-light operations, seeking value creation through the HCCB stake sale. The sale could serve as a precursor to the IPO, helping establish HCCB’s valuation. PepsiCo previously transitioned its bottling operations to Varun Beverages, leading to a substantial rise in Varun’s market value, The Economic Times report said.

HCCB financial performance

Hindustan Coca-Cola Beverages recently reported a 9.2 per cent increase in revenue to Rs 14,021 crore for FY24, with a net profit surge of 247 per cent year-over-year. The company’s expansion plans include a $1.5 billion capital expenditure over five years to enhance bottling capacities and build new facilities in Gujarat and Madhya Pradesh.

Balancing equity and debt

Despite the magnitude of this investment, the Bhartia family aims to avoid excessive leverage by raising Rs 3,000-Rs 3,500 crore in debt from mutual funds, which offer lower-cost financing than traditional bank loans. Initially, the family explored options with various asset managers and foreign banks, but opted for a long-term partner over short-term mezzanine funding.