India Inc’s China units face brunt of geopolitics
nMUMBAI: Barely two months after resuming operations in China, Indian tech companies with a Chinese presence find themselves facing new uncertainties amid rising geopolitical tensions between Indian and China.
Experts suggest that Indian IT providers that service global MNCS in China maybe at risk of losing those projects, which will impact the investments made by these companies in the Chinese market.
Such concerns have arisen as India is seeing a strong antichina sentiment culminating in the government announcing a temporary ban on a host of Chinese
apps on Monday evening. Actions by the Indian authorities could lead to retaliatory measures by Chinese counterparts.
Indian IT companies have been eyeing the Chinese market as part of their strategy to reduce dependence on tapping the Chinese market to the US and UK, which together make up over 70% of Indian IT exports. The current hostile environment is expected to affect such plans. Last year, the IT industry body Nasscom had launched the third phase of the Sino-indian Digital Collaboration Plaza, an initiative to bring Indian IT companies and Chinese enterprises closer to each other on a single AI enabled platform. According to Nasscom estimates from 2019, Chinese IT services spend was more than $35 billion, of which India’s share was around $500 million. Now, websites for all three phases are inaccessible.
According to data from the Shanghai Indian Consulate, Shanghai gets the maximum Indian investments while housing companies like TCS, Infosys and NIIT Technologies. Regions of Zhejiang and Jiangsu house manufacturing units of Mahindra & Mahindra, Tata Jaguar Land Rover, Sundaram Fasteners and Dr Reddy’s Laboratories among many others. Nasscom as well as the IT companies did not respond to queries on any measures they are taking to safeguard their Chinese operations. After China ended its Covid-19 lockdown in early April, Indian businesses that were affected elsewhere globally were able to start operations in China. According to data from Gartner research, Indian IT services providers such as Infosys, Wipro, TCS have multi-location footprint (including Beijing, Shanghai) in China. The average employee strength may vary between 1000 to 5000 employees for each of the leading service providers.
nMUMBAI: Almost a year after promoters of debt-ridden Zee Entertainment Enterprises Ltd (ZEEL) sold 11% stake in the company, YES Bank Ltd has moved the Mumbai High Court, asking it to prevent them from selling any more stake, and stop Zee promoter Punit Goenka from leaving India. Essel group, which includes ZEEL, owes as much as ₹8000 crore to YES Bank, which itself is in the middle of a complicated rescue.
According to the YES Bank petition, Zee group company Living Entertainment Ltd (LEL) had borrowed $50 million from YES Bank in 2016 to buy shares in its own unit Veria International. Goenka had provided guarantees for the loan. Separately, LEL entered into a put option agreement with another group company called ATL Media. Both are based in Mauritius. While LEL procures and supplies health and wellness content, ATL operates 35 TV channels outside India in 170 countries.
Under the put option, if the promoter stake in Zee fell below 30%, ATL must buy up to a 64.38% stake that LEL holds in Veria International, and also repay the loan. After this agreement was made, LEL assigned all its rights, titles and interest under the put option in favour of the trustee on behalf of YES Bank as additional guarantee for the $50 million loan, along with Goenka’s guarantee.
According to YES Bank, after the promoters sold an 11% stake in ZEEL to Invesco Oppenheimer Developing Markets Fund on 31 July 2019, their stake in ZEE fell below 30%, breaching the LELYES Bank loan agreement. However, when Yes Bank invoked the put option, ATL declined to purchase the committed 64.38% stake in Veria and transfer $52.5 million to repay the loan.
Additionally, YES Bank also sought an injunction restraining Goenka from leaving the country. It claimed Zee is attempting to transfer its assets and properties out of India by declaring dividends and making undue payments to its officers. The bank also fears promoters may shift focus to offshore businesses.
INDIAN IT PROVIDERS THAT SERVICE GLOBAL MNCS IN CHINA MAYBE AT RISK OF LOSING THOSE PROJECTS, SAY EXPERTS