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Allied Domecq set to hike stake in local JV

Bhupesh Bhandari

UK-based Allied Domecq is all set to increase its stake in Allied Domecq Spirits & Wine (I) Ltd from 50 per cent to 74 per cent.

"We have reached an agreement to this effect with our partner, the Delhi-based Clan Morgan & Co," Allied Domecq (I) chief executive officer Srikant Illuri said.

The company will shortly apply to the Foreign Investment Promotion Board (FIPB) in this regard. Currently, Allied Domecq (I) is a 50:50 joint venture between Allied Domecq and Clan Morgan & Co.

However, once the proposal receives the government's nod, the shareholding of Clan Morgan & Co will fall from 50 per cent to 26 per cent.

Clan Morgan & Co is a closely-held company owned by the Delhi-based Khanna family. It will receive some Rs 220 million from Allied Domecq for selling its 24 per cent stake. At the moment, there are nine members on the board of directors of Allied Domecq (I), with five nominated by Allied Domecq and the remaining four by the Khanna family.

After the change, Allied Domecq will have six nominees on the board, while the Khanna family will have two.

The two partners have been talking about altering the existing shareholding pattern for almost a year now. Explaining the reason for the change in the shareholding, Illuri said: "The current shareholding structure was constraining the investments we have been planning. The change will ease the constraint."

When asked if this was a precursor to Allied Domecq acquiring a 100 per cent stake in the local company, Illuri said that there was no immediate reason to force the issue.

The hike in stake will clear the decks for the investment that Allied Domecq (I) is planning to make.

According to Illuri, the company is likely to freeze its budget for the next financial year beginning September 1, 2001, by the end of the next month.

"It is only then that we will be able to come up with a figure for the investment we are planning," he said. However, he added that the investment will be more than the amount Allied Domecq is paying to up its stake.

According to Illuri, Allied Domecq (I) is the market leader in the bottled-in-India Scotch category with a 50 per cent market share. Teachers is the company's flagship brand in India.

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