Food delivery aggregator Zomato is facing difficulty in receiving the second tranche of $100 million equity capital from Ant Financial -- an affiliate of Chinese internet behemoth Alibaba -- due to new FDI rules and the ongoing India-China border tension.
Zomato in January raised $150 million from Ant Financial. However, at that time, Zomato only received $50 million as a part of the first tranche of the investment. The aforementioned funding from Ant Financial valued the online food delivery startup at $3 billion in January.
Due to the implementation of new FDI rule in April, any country that shares a land border with India can no longer avail of the automatic route in the FDI, but must seek government clearance over any investment proposal. As a result, in this case, China has to seek approval.
Last week, the government banned 59 Chinese apps, including TikTok and CamScanner, among others, after a major skirmish at the Galwan valley, in which 20 Indian soldiers were killed. Consequently, the prospects of the Chinese capital into Indian startups look grim.
Ant Financial has been an investor in Zomato since 2018. It has been backing Zomato since it picked up a 14.7 per cent stake in 2018. It followed that up by raising its holding to 23 per cent in November the same year.
Since the start of 2020, Indian startups, primarily the unicorns, have seen 15 deals from Chinese investors, out of which 13 were recorded until April. For instance, Alibaba poured $150 million into Zomato in January, while Tencent invested nearly $20 million as part of Swiggy's $150 million round in February.
Alibaba also infused $60 million round in BigBasket in April, and Tencent joined Khatabook's $60 million round in May. Overall, in the last five years, Chinese investors have poured in over $5.7billion into the Indian startup ecosystem, according to data from Venture Intelligence.
Other unicorns that have attracted Chinese funding over the years include Ola (Tencent, Sailing Capital), Flipkart (Tencent, TR Capital), Paytm (Alibaba), BYJU'S (Tencent), Delhivery (Fosun Group), among others.