Zomato finds it hard to get $100 Mn from Ant Financial after revised FDI rule

Indian startups who have been in the middle of raising funds from Chinese investors are uncertain about successful closures due to the change in rule for capital coming in from China. Foodtech unicorn Zomato appears to be at the receiving end as the firm is finding it difficult to get proceeds from Ant Financial.

Zomato had announced a $150 million fundraise from Ant Financial earlier this year. But, it only received $50 million prior to the new introduction of new FDI regulation in April that requires government approval for investments from countries sharing a border with India. As a result, the remaining $100 million infusion has been awaiting approval from the government, reveals an FT report.

Aimed at Chinese investors, the government had amended the existing Foreign Exchange Management Act for foreign direct investment in India by border sharing countries in April.

While the Gurugram-based company is in the process of getting regulatory approval for a $100 million tranche from Ant Financial, it won’t be an easy process as the two countries have been at loggerheads due to the tension at India’s northern border.

Entrackr’s queries to Alibaba’s spokesperson didn’t elicit any immediate response while Zomato declined to comment on the story.

The Indian government had recently banned 59 Chinese apps, including TikTok, after a recent skirmish at the Galwan valley. 

Experts believe that Zomato may take months to get a regulatory nod. “It’s unlikely that Zomato will get quick approval. There are many companies who were seeking funds from China and have been waiting for approval — which may take time and may not even materialise,” said an investment banker who deals with Chinese funds, requesting anonymity.

The delay may impact Zomato’s operations which have already been hit massively due to the Covid-19 pandemic. Online food ordering is down by 60-70% even after the relaxation in lockdown as people have been avoiding outside food.

To extend its runway and control the burn rate, Zomato had fired 13% of its total workforce and pulled the plug from its newly launched grocery delivery vertical Zomato Market. The delay in funding from Ant Financial would further aggravate the situation for the Deepinder Goyal-led firm.

Ant Financial is the main backer of Zomato and holds a close to 25% stake in the food tech firm. Till date, it has invested $560 million in Zomato spread across several rounds.