As the availability of cash in the market has seen a rapid change due to the global pandemic, economists and market experts believe that the hunger for Initial Public Offerings (IPO) has increased. After Paytm in June, Zomato is all set to list its Initial Public Offering (IPO) in July. With an expectation of raising Rs 8,250 Crores, the Zomato IPO is expected to be the largest since SBI Cards and Payments in 2010. Zomato’s parent company, Info Edge is expected to sell shares amounting to $10 million in the offering. The offer for sale of the company is anticipated to raise Rs 750 Crores. Through a fresh issue of equity shares, Zomato is planning to raise Rs 7,500 Crores. But the fruits of the offering might not be enjoyed by Jack Ma’s Ant Group, which owns 16.65% of Zomato through Alipay Singapore and Antfin Singapore Holdings.
Similarly, Ant Group holds a 30.33% share in Paytm and is the largest shareholder. Zomato raised $150 million from Ant Financial last year, which has been an investor in Zomato since 2018. Jack Ma may not be able to participate without any restrains in corporate functions such as rights and bonus issues because of the restrictions imposed by the Indian government on foreign direct investment (FDI) from Chinese companies. The revised FDI policy released by the Government of India through Press Note 3, came from the backdrop of the COVID-19 pandemic in 2020 to curb “opportunistic takeovers” of companies hit by the lockdown. In the last five years, China’s investors have invested almost $5.7 billion in India’s start-up ecosystem.
What was the revised policy?
In the revised FDI norms, the Government of India had made it compulsory for the companies in neighbouring countries willing to invest in Indian firms, to first apply for approval from the government. A firm of a country that shares a land border with India can invest in Indian companies only “through Government route.” This rule also applies to companies that are not located in the neighbouring countries but its owner is a resident of such a neighbouring country. The Press Note released by the Indian government though did not name any country, it was not difficult to understand that the move was targeted at Chinese investments. This resolution came after China’s central bank, the People’s Bank of China (PBoC) had increased its shareholding in HDFC Bank to over 1 per cent. The PBoC had been an existing shareholder in the largest private sector bank of India with 0.8 per cent shareholding in 2019.
Reports suggested that China’s FDI since 2014 had grown five times, in December 2019 aggregate investment in India was $8 billion. This amount was way higher than investments by other countries sharing land borders with India. According to a paper by Brookings India, the total planned and current Chinese investment in India amounted to over $26 billion.
China had demanded India to revise these “discriminatory regulations” and treat investments from different countries equally. China’s spokesperson for the Chinese Embassy in India stated that the additional norms set by India for investors from specific countries were a violation of the World Trade Organisation’s (WTO) principle of non-discrimination. He also stated that the revised policy went against the general trend of liberalization and facilitation of trade and investment. According to China, this move by India was a strong violation of the consensus of G20 leaders and trade ministers’ aspiration of a free, fair, non-discriminatory, predictable, transparent and stable trade and investment ecosystem, and to keep the markets open.
On these accusations by China, India has maintained its position by denying that the policy was targeted at China. According to India, the policy was aimed at checking “opportunistic” takeovers of Indian companies.
Story of Jack Ma’s disappearance
Jack Ma was about to become the richest man in China. In 2017, Jack Ma was ranked second in the annual “World’s 50 Greatest Leaders” list by Fortune. He is an influential figure for the community of startup businesses and is widely accepted as an informal global ambassador for Chinese businesses. In November 2020, on the day before the company’s another commercial success, the billionaire suddenly went missing. Ma started Ali Baba as an online departmental store from his apartment, now it has become one of the largest tech giants. The tech giant has touched the lives of almost 800 million users with services ranging from online shopping, artificial intelligence and cloud computing. The business tycoon has attracted the world with its ostentatious presence and frequent publicity stunts.
He’s known for impressing his employees in several ways, which include throwing regular parties for them to celebrate each success. Jack Ma’s latest venture, Ant Group dominates the digital payment market in China through its transaction app Alipay. Ant Group’s vision is to revolutionise banking in China by shifting power away from traditional institutions. Ant Group was all set to launch the world’s biggest public offering in October. But, before the launch, the outspoken billionaire addressed an assembly of powerful figures with a controversial speech. In the speech, the tech magnate criticized the country’s regulatory system for oppressing innovation. He didn’t stop there, he went on and compared China’s banks with “pawnshops.”
Pointless to say, Ma’s speech did not hit the right chord with the Chinese government’s regulatory authorities. The government retaliated by suppressing its business empire. The first move taken by the Chinese government officials was to put a halt to the huge $37 billion IPO of the company and asked the company to reconstruct its lending business to meet the capital requirements. After a few months, the Chinese government started an anti-monopoly investigation against Jack Ma’s company. In the midst of these controversies, Jack Ma was reported missing. Experts were of the view that he was just maintaining a “low profile” in the backdrop of such crackdown on his business empire by the Chinese officials. Alibaba’s share dived by almost 10 per cent in Hong Kong and Ma lost almost $3 billion in his net worth.
What’s next for the tech magnate?
In China, offending the government is not healthy for normal citizens, leave alone businessmen. Jack Ma’s speech directly derogated the Chinese government, that too in front of the whole world. According to experts, offending the Chinese authorities won’t cost cheap for Jack Ma. After reappearing in the public eye, the fact was somewhat clear that the billionaire was lying low for his offensive comments thrown at the Chinese government, and this might prove to be unhealthy for his vast business empire. The future of Alibaba Group and Ant Group (Ant Financial and Ali Pay) now rests in the hands of the Chinese government.
The company has already faced extreme losses due to the government’s actions. His businesses could face stagnation after the suppression by the Chinese government. There are chances that the government will further control Alibaba Group’s businesses and might split them up or even nationalize them or impose heavy fines. Since the future of Jack Ma now depends on the mercy of the Chinese government, Jack Ma needs to effectively try to mend the relationship, the chances of which it seems narrow. But, if Jack Ma has to save his business from drowning, that’s the only option left for him.
Edited by Aishwarya Ingle