Restaurant aggregator and food delivery app, Zomato, lost access to its $100 million equity raised through Chinese investment after the Indian government revised its Foreign Direct Investment (FDI) policies amid tensions with the neighbouring country.

Zomato had announced that it received $150 million from Ant Financial, its biggest Chinese investor, at the beginning of the year.

However, an amount close to $100m of the latest tranche of financing from Ant Financial is reportedly going through the government’s approval process and has been delayed.

According to a Financial Times report, a Zomato official said that the company is ‘confident’ the funds will come through. Also, it was said that the procedural delay and the eventual shortfall has not changed the company’s overall operations and business plan which includes a planned initial public offering (IPO) in 2021.

Ant Financial, a subsidiary of Chinese giant Alibaba, has invested more than $560 million and holds more than 25 per cent stake in the company and plays a crucial role in the company’s strategic growth.

The coronavirus pandemic has hit the Indian economy severely, particularly the start-ups which have been struggling with the retaining the operations and the employees with the majority of such businesses significantly dependent on Chinese investors including Tencent and Alibaba.

In April, the Indian government made changes to the FDI norms and make it mandatory to get prior approval for foreign investments from countries India shares land borders with, including China, to block ‘opportunistic’ takeovers, and protect local businesses.

The anti-China sentiment gained pace in the country after a deadly clash between soldiers from the two countries in Ladakh’s Galwan Valley. This has hurt both Chinese companies operating in India and Indian start-ups heavily backed with Chinese investment.

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