Cadbury to buy out Indian subsidiary

Mumbai: In a brief statement issued to the London Stock Exchange, the British confectionery and soft drinks group Cadbury Schweppes has announced its intention to pick up 100 per cent stake in its Indian subsidiary, Cadbury India, at a price not exceeding Rs 500 per share.

Cadbury Schweppes presently holds a 51-per cent stake in the company after which the public is the largest holder of equity with a 27.30-per cent stake. The rest of the shareholding pattern is: FIIs (8.04 per cent); financial institutions (7.05 per cent); mutual funds (5.58 per cent); and corporate bodies (1 per cent). The total value of the shares would come to $370 million.

It is not clear why the British parent wants to buy out its India operations. However, the decision is in line with those taken by many multinational companies in the recent past. Organisations like Otis Elevators and Carrier Aircon have, in the very recent past, decided to make open-offers at substantially higher prices to lure Indian shareholders to sell their holdings.

As per Indian laws, once the shareholding rises above 90 per cent, the shares can be delisted from the bourses, after it completes the buyback of the balance 10-per cent stake as well. Reportedly, most of these companies have shown displeasure at the discounting given to their stocks by the bourses which, they feel, are on the lower side.

Nonetheless, market players have remained unperturbed by the complaint, pointing out that most of these companies are fighting saturated market conditions, in the process registering very little growth.

Cadbury India contributes about 3 per cent to the global revenues of Cadbury Schweppes. But the Indian market continues to depict growth, though lower than earlier projections. For example Cadbury recently scaled down its growth projections at 12 per cent, in comparison to the 20 per cent estimated earlier. Some of company's well-known brands are Perk, Five Star and Cadbury Dairy Milk.