Chinese investors have pumped around $6 billion in just last two years into Indian start-up firms.

One of the most notable of such investors has been the Ant Financial – an affiliate of Chinese Alibaba Group – which holds stakes in some of the most promising Indian unicorns including BigBasket, Snapdeal, Paytm and Zomato. 

Zomato is a well-known and popular food delivery app in India. This 12-years old company headquartered in Gurgaon, India, was in the news earlier this year when it acquired Uber Eats. 

Food delivery start-ups in India have been struggling for years, making losses trying to attract customers with heavy discounts.

Zomato, one of the two leading food delivery start-ups in India provided a glint of hope to the industry when it announced in January this year that Ant Financial had committed to invest around $150 million into the firm.

However, only after receiving $50 million or two-thirds of the promised capital, the investment deal between Zomato and Ant Financial now stands disrupted because of the change in the regulatory policy by India. 

Following the border tensions that broke out between India and China, India not only banned Chinese apps operating in Indian markets but changed its foreign direct investment policy too.

The newly revised policy requires all its neighbouring countries to seek approval before conducting any deals within India.

The Silver Lining

Unlike other countries, food delivery companies in India has been hit badly during the COVID-19 crises.

For one thing, people became very cautious about ordering online after a delivery person from a famous restaurant chain infected quite a few people in New Delhi.

Naturally, Zomato along with every other food delivery start-up firms were severely affected by the pandemic. 

But Zomato maintained that although the crises significantly reduced the number of orders placed on the platform, it has helped the company improve unit economics. 

As Zomato still struggles to receive the remaining $100 million from Ant Financial, there appears to be a silver lining for the food delivery start-up.

Resuming financing round-up that was originally expected to be closed by January this year, Zomato has successfully raised $62 million from Temasek, Singapore’s state investment arm. 

In January this year the chief executive officer of the company, Deepinder Goyal mentioned that Zomato expected to close a round of around $600 million by the end of the month.

It got delayed due to the coronavirus outbreak and was expected to be closed by mid-May. Now, Zomato has resumed their efforts and Temasek is the latest to invest in the start-up company.

Chinese investment on hold

Although Alibaba Group maintains that it does not intend to reduce its investment stakes in its existing portfolio of Indian start-ups, any new future investments have been put on hold. The start-up firms in India like Zomato, have already started to feel the pressure.

Hence, whether India can tide over this period and find funding from investors elsewhere or will they revise their recent policy once more to allow Chinese investors more flexibility, that is yet to be seen. 

Sources: Tech Crunch, Business Today

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About the author

Srimayee Sen Sarma

Contributing Author

Srimayee has over 10 years of experience in creating content. Driven by her passion for writing, She has had her articles published with a byline in newspapers, magazines, blogs, and websites. Her other passions include reading, gardening and traveling.