New Delhi: UK-based Vodafone is not the only one awaiting the Indian government’s call on its purchase of stake in Hutch-Essar, US coffee retail giant Starbucks is also anxiously looking for a decision on the issue.
Though Starbucks and Vodafone have nothing in common, except that both the companies’ India foray is awaiting an approval from Foreign Investment Promotion Board (FIPB), Starbucks is taking the ruling on Hutch-Essar’s foreign shareholding pattern as a benchmark.
Starbucks is looking at FIPB’s decision on Vodafone deal, which is expected on 23 April, before going ahead with any change in the shareholding pattern of its proposed venture in India, sources close to the firm said.
It is believed the US firm has been asked by FIPB to change the partnership shareholding structure of its Indian venture, through which it plans to open its first local store by the end of 2007.
The company had filed for FIPB approval in December 2006, but the proposal is yet to get a clearance.
When contacted, a Starbucks spokersperson from Seattle told PTI the company was working closely with the Indian government to provide additional information needed for a decision on its entry into India.
“We respect the Indian government’s decision-making process and are fully cooperating with the appropriate agencies,” the official added.
While it does not want issues like foreign holdings to disrupt India plans, which is key to its expansion and a stated target of 10,000 new stores by 2010, any changes are unlikely before a decision on Vodafone deal, sources said.
The company may even rope in a new partner as it has not signed a binding partnership agreement as yet for the India venture, the sources said.
Starbucks has reportedly tied up with its Indonesian franchise owner V. P. Sharma and Indian retailer Future Group’s Kishore Biyani. However, it has not officially disclosed its partners for the India venture so far.
The company proposes to hold up to 51% in its Indian venture, the maximum that is allowed under the overseas ownership cap in single-brand retail business.
However, regulators are considering a part of the stake of its minority Indian partners as foreign due to the overseas shareholding in their holding companies, sources said.
Similar regulatory hurdles are haunting Vodafone as well, whose $11.1 billion (Rs46,376 crore) acquisition of controlling stake in Hutch-Essar has hit FIPB roadblock due to complaints about breach of FDI norms.
Concerns have been raised about taking the entire equity of minority partners— industrialist Analjit Singh and Hutch Essar MD Asim Ghosh—as Indian due to the foreign investment in the holding firms through which they own their stakes.
While Starbucks’ equity structure is less complex, it believes the Vodafone decision will give it a better idea of the regulatory framework for foreign investment in India before it goes for any change.
Asserting full co-operation to the government, the company spokesperson said Starbucks was optimistic about its foray in the country with “a yet-to-be announced joint venture partner” before the end of 2007.