China’s Alibaba Group has put its plans for investments into Indian companies on hold, Reuters reported on Wednesday. The company will pause fresh funding for at least six months, but there are no plans to reduce stakes in Indian start-ups or exit any investments. Alibaba and its payments affiliate Ant Group’s investments in India include Paytm, Zomato, and BigBasket. Ant Group also has stake in Paytm Mall.
Indo-China relations soured after the clash in Galwan valley, which left dozens of Indian soldiers dead. Soon after, India banned 59 apps with origins in China, including ByteDance’s popular short-video app TikTok, along with WeChat, CamScanner, and UC Browser.
Chinese internet giants have driven the growth of Indian start-ups, many of which have achieved unicorn status. Apart from the above, Alibaba has also invested Snapdeal and logistics firms Xpressbees. Tencent, another internet giant in China, has invested in Practo, Swiggy, Flipkart, Ola, BYJU’s, Dream11, and Udaan.
Ant Group’s Zomato investment was stalled: In its IPO prospectus filed on Tuesday, Ant Group disclosed that the Indian government’s protectionist foreign investment policy led to “further evaluation of the timing of our additional investment” in Zomato. In April, India modified the Press Note 2 (2020 series), adding a bureaucratic layer of control over foreign investments and acquisitions in Indian companies. This change was intended to stave off predatory investments into startups stressed because of the pandemic.
Paytm is Ant’s e-wallet partner in India, and Ant Group holds a 30.33% equity stake in its parent company One97 Communications. One97’s other shareholders include Alibaba, SoftBank Vision Fund, and other independent third parties. “Entities over which we have significant influence or joint control are classified associates or joint ventures,” Ant Group said, while listing One97 as an associate.
Other countries tend to adopt policies similar to the US: Ant Group specifically pointed out that other countries tend to ape US policy and may adapt similar stances around their “relationships with China or against Chinese companies and restricting their operations”. Although unrelated to Indo-China relations, India has justified its own demand for traceability on WhatsApp — and consequent demand for breaking end-to-end encryption — after the US and other countries urged Facebook to not implement such encryption on its messaging platforms.