Is Starbucks JV too early to celebrate at Tata Global Beverages?

There is no data available yet to ascertain what kind of business perspective it will have

Tata Global Beverages has gone up 11% since Friday after the company announced that the joint venture with global coffee chain Starbucks will kickstart its operations by the end of next month, is it too early to celebrate?

Though analysts are mostly bullish about the developments, some say it is too early to say anything about the results.

"If you look at fundamental perspective, there is no data available to ascertain what kind of business perspective it will have. Once the numbers come out, analysts can do analysis on retruns on capital employed and returns on investment," says Ajay Parmar, co-head, investment banking, Emkay Global Financial Services.

Tata Starbucks, the equal JV between Starbucks Cofee and Tata Global Beverages on September 28 announced that the first store in India will open in the Horniman Circle area of Mumbai by the end of October 2012. Tata Starbucks also announced the appointment of Avani Saglani Davda as CEO.

"Though it is a positive news for the company, the stock also gone up riding the increase in stock indices. Investors are preferring the defensive stocks such as FMCG scrips," Parmar said.Sensex has risen 1.32% since the company announced plans.

The store will also be the first Starbucks location to feature espresso sourced and roasted locally from India through the coffee sourcing and roasting agreement with Tata Coffee, Tata Starbucks said.

"It is a good start for the venture. For Tata Global it is getting into high margin business, that is why invenstors are bullish about it. Moreover, Starbucks has been successful in whichever markets its has entered into Asia. Investors must be thinking that the Indian venture will also have good amount of traction," said Ganesh Ram, an analyst with Kim Eng Securities.

"Tatas are looking to move beyond tea and coffee and it is step in that direction," Ram said.