In January, Zomato announced it had obtained $ 150 million in new financing from Ant Financial, the Chinese giant in digital payments. But he was unable to access $ 100 million of that total, according to two people with first-hand knowledge of the situation.
In April, the Indian government announced that it would block “opportunistic takeovers” by demanding formal approval of any investment from a country that shares a land border with India.
In recent years, Indian start-ups have depended on significant funding from Chinese investors, including Tencent and Alibaba, which is Ant Financial’s sister company.
But a wave of anti-Chinese sentiment, particularly following a deadly clash between soldiers from the two Himalayan countries, has hurt both Chinese companies operating in India and Indian start-ups with donors Chinese funds.
Zomato workers in Kolkata hit the headlines this week by burning their T-shirts to protest the violence and Chinese investment in the business.
Ant Financial has invested nearly $ 560 million in Zomato, which gives it more than 25% ownership in the business. The investment was critical because Zomato is fighting for market share with Swiggy, its main competitor, supported by Tencent. Zomato has another Chinese donor in the form of Meituan-Dianping, the largest food delivery app in China.
In January, Zomato agreed to purchase Uber’s food delivery operations in India, giving the San Francisco-based company a 9.99% stake in the combined group.
Almost $ 100 million from Ant Financial’s final tranche of funding is currently going through the government approval process. Zomato is “confident” that the funds will be channeled, said people familiar with the situation. The shortfall has not changed the company’s overall business plan, one person at Zomato said, including an IPO scheduled for 2021.
But the uncertainty caused by the new regulations arises as Indian start-ups struggle with the economic fallout from the coronavirus pandemic.
Zomato laid off 13% of its workforce in May and chief executive officer Deepinder Goyal said it expects the number of restaurants to drop from 25% to 40% in the next six to 12 months. Swiggy has also laid off more than 1,000 employees.
India has also taken action against China, including blocking Chinese customs imports and banning 59 Chinese mobile phone applications, including TikTok and WeChat, on Monday.
According to a March report from Gateway House, a Mumbai-based think tank, more than 60% of the 30 Indian unicorns – private companies valued at more than $ 1 billion – are funded either by large Chinese technology groups, or by venture capital funds. Chinese investors are behind companies like Paytm and Ola.
“There is a lot of rattling and posturing going on,” said Arvind Singhal, director of the Technopak board in New Delhi.
“It is almost impossible for India to disengage economically from China at this time,” said Singhal. “But you have to think like a politician, they have a much bigger constituency to respond to. “