Global Economy

Investors in talks with firms to diversify China exposure in supply chain, funding


BENGALURU: India’s investor community has begun conversations with companies to diversify their China exposure and search for alternatives, whether it is for production and supply chain or fundraising, four people aware of these discussions told ET.

“This sentiment against China is not a gimmick, it’s here to stay,” said a venture capitalist at a toptier fund based in Bengaluru.

For consumer brands and electric mobility startups, this would largely mean finding alternative supply chain channels in India for manufacturing components and packaging materials, while social commerce players will have to relook at their suppliers’ backend procurement processes, the sources said. “Interactions with unicorn stage portfolio founders tell us that large fundraising deals are stuck,” said the person quoted earlier. “At the same time, operations are also being affected for brands that source components from China or platforms that depend on brands that rely on imports from the country,” he said.

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Even ecommerce companies like Flipkart and Amazon, which are heavily dependent on smartphone sales anchored by Chinese brands, are figuring out newer strategies. Amazon, for instance, is betting big on promoting local stores on its platform.

New-age brands like MamaEarth, Vadham Teas, PeeBuddy, Wow Skin Sciences, LifeLong, and Bombay Shaving Company (BSC) said shoppers are increasingly looking for products manufactured in India as a filter to buy online, across categories.

“Covid has clearly penalised companies with global supply chains, especially ones with strong China dependencies,” said Varun Alagh, CEO of MamaEarth, a fast-growing personal care brand. “For us, the movement of B2B supply chain to India has been an ongoing process for the last year. It has of course been expedited now.” MamaEarth has grown 25% in May over its pre-Covid-19 average on the back of its capability to scale its India capacity. Chirag Taneja, chief revenue officer at BSC, said, “’Made in India’ narrative is on the rise in the country. Over the last few weeks, we have seen significantly higher conversion rates for advertisements having such made in India theme.”

Funding rounds are also seeing an impact of the increasing anti-China sentiment following the killing of 20 Indian soldiers at Galwan Valley in eastern Ladakh and the ongoing standoff between the two countries along the Line of Actual Control.

Earlier this week, Zomato’s existing investor InfoEdge said the food delivery company is yet to receive $100 million from the $150 million it raised from existing backer China’s Ant Financial in January this year. InfoEdge, which is a big shareholder in Zomato, said the effort is to bring on board investors from outside of China.

A person close to the matter said the food delivery platform did not want to get stuck in the current political whirlwind and therefore has not applied for approval of the investment.





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