Chinese conglomerate Alibaba Group has reportedly put on hold plans to invest in Indian companies for at least six months, in the wake of worsening political ties between the two countries. However, it has no plans to reduce its stake or exit investments, according to media reports.
This move could affect the fundraising plans of Indian startups such as payments platform Paytm, restaurant aggregator and food delivery service Zomato, and e-grocer BigBasket. Alibaba and its subsidiaries Alibaba Capital Partners and Ant Group have invested more than $2 billion in Indian companies since 2015.
Ant Group had earlier flagged concerns about investing in India, while filing for an initial public offering. It said a change in foreign investment rules in India had hampered its investment in Indian startups.
In April, India had made government approval mandatory for foreign direct investments from China and six other bordering countries – Pakistan, Bangladesh, Nepal, Myanmar, Bhutan and Afghanistan, to prevent opportunistic takeovers amid the Covid-19 pandemic. India took this step after China’s central bank bought a minority stake in leading mortgage lender Housing Development Finance Corporation.
The ties between the two countries were further strained by a border clash in June, in which 20 Indian soldiers were killed. New Delhi blocked TikTok and 58 other Chinese apps in the country and later extended the ban to several dozen more apps, citing security risks.
India further tightened curbs on Chinese goods and businesses amid a call for boycotts on social media platforms. Chinese smartphone brands experienced a supply crunch due to the delayed shipment of components and their market share dropped to 72% in the April-June quarter, compared with 81% in the first three months of this year.
Chinese firms are also being barred from taking up various infrastructure projects, and the participation of Huawei Technologies and ZTE in the forthcoming 5G trials is in doubt. Huawei’s clients include Bharti Airtel and Vodafone Idea, and ZTE supplies gear to state-owned Bharat Sanchar Nigam Limited.