Wednesday, 29 June, 2022
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Chinese tech giant Alibaba puts investment plans for India on hold amid ‘souring relations’

Bilateral tensions have forced Chinese firms to hold investment plans in India. But Alibaba doesn’t plan to 'reduce its stakes or exit investments' in India.

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New Delhi: Chinese tech giant Alibaba Group has put on hold its plans to invest in Indian firms for at least “six months”, a Reuters report said citing two unnamed sources.

According to the report Wednesday, the move follows “souring business relations and rising political tension” between India and China after the Galwan clash at the Line of Actual Control (LAC) on 15 June.

Alibaba’s decision could impact the fundraising plans of some of its Indian investee companies, which include payments firm Paytm, food aggregator Zomato, and e-grocer BigBasket, said the report.

Preparing for its IPO, Alibaba affiliate Ant Group noted the challenges it faces, adding in its filing this week that change in foreign investment rules in India had led to a “further evaluation of the timing” of its additional investment in Zomato, the report said.

Ant Group has 30 per cent stake in the Paytm parent company, One97 Communications, and holds “significant influence” over it.

The report noted that Indian start-ups are heavily funded by Chinese investors such as Alibaba and Tencent.

Since 2015, Alibaba and its affiliates like Alibaba Capital Partners and Ant Group have put in over $2 billion into Indian companies, in addition to being part of funding rounds worth $1.8 billion. The report cited this data from market tracker PitchBook.

Also read: No salary hikes means India’s economic recovery will have to wait even if hiring resumes

The escalating tensions

Ties between India and China have been on a sharp downturn since the Galwan clash. Calls for boycott of Chinese products have been growing, with the Indian government announcing its push to domestic industry under its Atmanirbhar Bharat (self-reliant India) mission.

In April, India began closer inspection of investments from neighbouring countries, in a move that sought to target China for any “opportunistic takeovers” during the Covid-19 pandemic.

The tensions have forced companies like “Alibaba and a few others” to pause investment plans for six months, in the hope that things would cool off a bit after that, the Reuters report quoted one of the sources as saying. The source added that no one wants to put their stakes on the block given the market condition.

The report, however, highlighted that Alibaba has no plans to “reduce its stakes or exit investments” in India.

It also quoted an expert to say that investors from the US and European investors could look to fill the funding vacuum, but the new investments could take time to come in.

Also read: Now, Tata plans ambitious e-commerce push to take on Amazon, Flipkart & Reliance


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