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Our Bureau

Govt awaiting new application

New Delhi June 26 The US-based coffee retail chain Starbucks' plans to enter India have been delayed further with the Government asking the company to file a new application for its proposed venture here.

The coffee chain's second application has not been rejected, in fact, it was Starbucks that had requested the Government to hold its application. "They (Starbucks) have asked us to hold their application. We never rejected their application. We had asked them some questions regarding their equity structure," said Mr Ajay Dua, Secretary, Department of Industrial Policy and Promotion, on the sidelines of a summit here.

Having announced its plans to enter India in 2006, Starbucks had sought approval from the Foreign Investment Promotion Board.

Initial application

However, its initial application was rejected on the grounds of a lack of clarity over its foreign equity structure under the sectoral cap that is fixed at 51 per cent in the single-brand retail sector.

The first time round, Starbucks had proposed the name of its Indonesian franchise holder, Mr V.P. Sharma, a non-resident Indian, as one of its partners for its Indian venture. But the application was rejected since regulations consider equity held by an NRI as foreign holding, thereby taking the total foreign equity holding beyond the permissible limits.

Starbucks applied a second time. This time, it proposed Mr Sharma as the majority partner with 51 per cent stake, with Mr Kishore Biyani of Future Group as its minority shareholder. However, it did not propose any direct holding for itself.

Franchise model

The American company is reported to have considered a franchise model, but Starbucks seems to want to keep its options of direct ownership of the Indian stores open, which could explain the firm's decision to review its application.

Starbucks had earlier said it planned to open its first store in the country by the end of 2007, as part of its aim to expand its presence to 40,000 stores worldwide, half of which would be outside the US.

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