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Friday, Apr 12, 2002

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`A Coke IPO will sizzle the capital market'

Ambarish Mukherjee

NEW DELHI, April 11

THOUGH Coca-Cola India has once again approached the Government seeking a waiver on the mandatory 49 per cent disinvestment norm on grounds of poor market conditions, the capital market in general feels that an initial public offering (IPO) from a company like Coca-Cola will simply be oversubscribed.

Coke is supposed to dilute 49 per cent stake by July 17. Most observers of primary market feel that the proposed Coke IPO may actually help the currently depressed capital market.

Coke's proposal seeking a waiver on the mandatory disinvestment condition is likely to be taken up by the Foreign Investment Promotion Board (FIPB) at its next meeting.

According to Mr Prithvi Haldea, Managing Director of Prime Database, the firm that tracks the Indian primary market, there will be a queue for the company's shares and it is likely to get oversubscribed. He is surprised why the company should hesitate to go public.

"A public offering from such a big global company like Coca-Cola will draw a lot of attention and there will be a queue for Coke shares. But I find that this company is seeking a waiver again and again and citing different reasons each time. It is no way a priority industry and when it was permitted to do business in India it was with this condition that it will dilute 49 per cent stake after five years. Foreign companies keep on saying that in India promises are not fulfilled. Now, why doesn't this multinational set an example by fulfilling its own commitment in this particular issue," Mr Haldea said.

According to Mr Vijay Bhusan of Bharat Bhusan Equity Traders, member of the National Stock Exchange (NSE): "They will get a good response. The scrip has a very good price in the US. I do not know what the issue size may be, but people will definitely have an interest in this scrip. Recently, the Bharti issue fared quite well and that was at a premium. This one being a par issue and from such a famous brand name, people will be interested taking into consideration that even if the company is not making any significant profit today, its future seems to be bright and hence investors' interest will be quite obvious."

According to Mr Satish Gogia, a senior NSE member, "the issue will surely be oversubscribed. Recently, there is news that the company has broken even. So the losses are over and the future looks bright. Their Kinley brand is also doing very well. If Bharti's premium issue could be oversubscribed, Coke's par issue should certainly be expected to fare better."

A BSE official, who requested anonymity, said that "It may not necessarily be a cake walk for Coke and the company will have to really sell the issue. But then, Coke is known for its selling abilities."

"Already, this issue of Coke IPO has hit the media headlines a number of times saying that the company doesn't want to go public. Who can guarantee that this in itself is not a conscious effort for publicity. It may also be that the company is sure of its future profitability and so does not want to share it with others and, therefore, trying to avoid dilution. But the brand name and the fact that the issue cannot demand a premium will certainly help the issue sail through," the BSE official said.

The Executive Director of Pune Stock Exchange, Mr Manish Rangari, when contacted, said "I think the IPO, if it happens, will be taken up in a very good manner. In the last couple of months a number of MNCs have come out with open offers giving their investors a chance to exit. But these investors had picked up these scrips five or 10 years back as value picks. So now many investors are looking for good companies. Coca-Cola is such a famous and very popular brand. It may, in some context and to a certain extent, be comparable to the best scrips in the market."

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