The Times said that State Street, which holds about 1.7 per cent stake in Vodafone, has said the firm risked repeating past mistakes of overpaying in an overheated situation.
The paper also quoted Mark Webster, senior investment manager at State Street: "The key is Vodafone must meet the acquisition criteria it has set. If it looks as though they might be breached, then it must be prepared to walk away."
When contacted, a Vodafone spokesperson declined to comment on the position of individual shareholders. Vodafone had in May last year laid down acquisition rules aimed at ensuring that transactions yield a return above the cost of capital within three to five years.
The Times report said Vodafone has yet to explain to its shareholders how a bid for Hutchison Essar would fit those criteria. Investors say they would need cast-iron evidence of the deals merit before agreeing to it, it said.
State Streets' views, however, are in contrast to that of some other investors. Standard Life Investments, which also owns 1.7 per cent stake in Vodafone, has welcomed the company's push to expand in emerging markets like India, while expressing confidence that it would not overpay for any deal.
Standard Life's Investment Director Wesley McCoy told PTI, "In order to ease worries about them overpaying to satisfy this appetite, the company has committed publicly to strict investment hurdles which should ensure they do not over pay for any asset."
The Times report said State Street's concern was being echoed by analysts. The report quoted Morten Singleton at WestLB, "At the higher price levels we are looking at now, it looks increasingly risky. If Vodafone is going to be asked for too much, then it has to be prepared to walk away."
The growing doubts over Vodafone's India ambitions come on the back of a number of potential suitors joining the list of interested parties in Hutch Essar.
While Vodafone and India's Reliance Communications have made their intention public last month about seeking controlling stake in Hutch Essar, Indian conglomerate Hinduja Group on Thursday said they were also interested in acquiring at least 51 per cent stake in the Indian mobile operator.
The other potential suitors include Essar Group, the Indian partner with 33 per cent stake in the joint venture with Hong Kong based Hutchison Telecom International.
The Times said Vodafone investors were supporting the company's Indian plans initially, helped by "strong communications" from Vodafone's new chairman Sir John Bond. However, as the bidding has intensified, some investors were raising concerns about the risk of Vodafone overpaying.
While Indian market has huge growth potential, it was not clear whether it would justify an $18 billion bid by the British mobile group, the report said.
Vodafone, which could buy maximum 74 per cent of Hutch Essar, is understood to be in talks with several potential local partners. Such tie-ups could help in reducing company's own bill, the report quoted analysts as saying.
