New Delhi. Chinese companies operating in India like Oppo, Vivo, Lenovo-Motorola, Haier and Midea are having to borrow from their group units to run their business. This borrowing is mainly being taken through ECB i.e. External Commercial Borrowing. Due to changes in Indian rules and government investigations, Chinese companies are neither able to get loans from Indian banks nor can they get direct investment from their parent company.
The biggest problem started after the implementation of Press Note 3 (PN3). The PN3 rules implemented in 2020 had banned FDI coming from neighboring countries like China from the automatic route. Government approval is now mandatory for any funding. Since the border dispute between India and China, no Chinese company has received this approval. Many companies did not get approval.
Banks are not giving loans
According to a report by Economic Times, investigations by agencies like Income Tax Department, Directorate of Revenue Intelligence and Enforcement Directorate started on many Chinese companies. The investigations were about whether the companies properly complied with tax, custom duty and foreign exchange laws. Due to these investigations, Indian banks also became hesitant in giving loans to these companies. Banks were afraid that if any regulatory action was being taken against the companies then giving loans to them could be risky.
support of group units
New filings with the Registrar of Companies show that many companies have borrowed huge amounts in the last one year. Let us know about the major Chinese companies which have taken loans from their group units-
Vivo – India’s largest smartphone maker Vivo Mobile India took ECB of Rs 1,668 crore in FY24. In FY23 this amount was Rs 2,875 crore.
Oppo- Oppo Mobiles took an unsecured ECB of Rs 1,667 crore from its Hong Kong-based group company Grand King Ltd and a working capital loan of Rs 414 crore from HSBC Bank in FY24.
Lenovo –Lenovo India gave an unsecured loan of Rs 300 crore to its Indian smartphone brand Motorola Mobility India so that the company can meet its daily expenses.
Haier – Haier Appliances India, a maker of refrigerators and washing machines, took Rs 214 crore from its Singapore parent.
Midea- Midea India availed an overdraft facility from Standard Chartered Bank, secured through a “comfort letter” from China. Apart from this, Midea also has a long-term loan of Rs 448 crore from a Singapore group company.
Xiaomi’s money stuck
Xiaomi’s situation is even more difficult, because about Rs 4,820 crore of it is stuck in India. Indian authorities had attached Xiaomi India’s bank accounts during the investigations, and the company says the cases are before the courts.
Haier preparing to sell stake
Haier Appliances India has not even received PN3 approval from its parent to bring in fresh funding of Rs 1,000 crore. The company wants to set up its third factory in India, but due to lack of approval, it is now considering selling stake in its Indian unit to Bharti Group.
Chinese companies do not want to leave India
Despite the challenges, Chinese companies want to remain in India. The reason for this is India’s huge market, especially their dominance in the smartphone sector. IDC report shows that out of the top 10 smartphone brands in India, eight are Chinese. In such a situation, it is clear that India is a very important market for Chinese companies and they cannot take the risk of shifting business from here.
