Alibaba, among other major Chinese investors, stops new investments in Indian startups after changes in Foreign Direct Investment rules by the government.
Prior approval from the government is made mandatory for investors for Foreign Direct Investment from the countries that share a land border with India. Amid tensions between India and China, there are chances of higher scrutiny of investment made from Chinese companies, making it unlikely that Alibaba Group, China`s tech giant will sign fresh deals with Indian companies in the coming months.
Zomato raised 150 million dollars from Ant financial, which is a unit of Chinese internet giant Alibaba in January. It also raised 62 million dollars from Singapore`s state investment arm Temasek Holding`s unit MacRitchie Investments in August. There was a delay for the remainder due to restrictions after the first tranche of 50 million dollars came from Ant financial in January.
Ant financial was gearing up for an Initial Public Offering (IPO) but faced many challenges this week. A change in Foreign Direct Investment rules in India has led to further evaluation of the timing of its further investment in Zomato. A total of 641 million dollars was invested in Indian startups by the Chinese investors the last year. Between January and July 2020, 166 million dollars were invested by the Chinese investors in Indian startups. 197 million dollars were invested a year ago in the same period, according to data from Venture Intelligence. Stricter government rules regarding Foreign Direct Investments from neighboring countries that came to force from April resulted in the drop of investments. According to the investment head of a large Chinese investor, no further investments will be made in India until further clarity regarding this matter is obtained.
Alibaba backed BigBasket was in the market to raise 200 million dollars from new investors in May. According to the reports provided by Hurun India Top Unicorn Investors 2020 on Wednesday, 8th and 11th positions are held by China`s Alibaba and Tencent, having invested 4 and 3 unicorns respectively, while top 2 investors in India`s startup unicorns are venture capital fund Sequoia Capital India and Japan’s SoftBank.
Alibaba has backed Paytm, Zomato, BigBasket, and Paytm Mall via its Singapore office, while Tencent has invested in Swiggy, Byju`s and fantasy gaming company Dream 11.
