Great wall of Indian regulation bars China electronics cos’ path to funding

Synopsis
Top Chinese electronics firms in India like Oppo and Vivo are now borrowing from their group companies. This shift comes as they face challenges in getting equity funding approval. Regulatory actions and the Press Note 3 rules are making it difficult to access local bank loans.
Listen to this article in summarized format
Loading...
×
Kolkata: Top Chinese electronic brands in India such as Oppo, Vivo, Lenovo-Motorola, Haier and Midea are funding their India businesses through borrowings from group entities, as per the latest Registrar of Companies filings. That’s due to lack of Press Note 3 (PN3) approval for equity funding and regulatory action against some of them, making accessibility to local bank loans a challenge, said people familiar with the matter.
Most of the funding is through the external commercial borrowing (ECB) route from related parties. Till PN3 regulations came into force, these entities funded Indian operations through equity capital. PN3 regulations effective 2020 barred foreign direct investment (FDI) through the automatic route for companies headquartered in neighbouring countries such as China.
All such funding requires Indian government clearance. This didn’t materialise amid border tensions, although relations are said to have warmed up lately.
Lenovo India provided unsecured loans of `300 crore in FY25 to smartphone maker Motorola Mobility India, part of the Lenovo group, to meet working capital requirements, according to filings by the two companies. Refrigerator and washing machine maker Haier Appliances India took a loan of `214 crore from parent Haier Singapore Investment Holding for a “business requirement” in FY25.
Live Events
Air-conditioners and appliances manufacturer Midea India has taken an overdraft facility from Standard Chartered Bank that’s secured by a comfort letter from parent Midea Group Co in China. Long-term ECBs from Midea Electric Trading (Singapore) Co amounted to `448 crore as of March 2025. The company has also deferred ECB payments due to the holding company without any penalty, showed the RoC filing, accessed through Tofler
“In the immediate years after PN3, Chinese companies were struggling with funding as equity capital dried up,” said a senior executive with a leading Chinese brand. “Then, there were multiple investigations against most of them by departments of income tax, revenue intelligence and the Directorate of Enforcement in relation to compliance of income tax, customs duties and foreign exchange regulations. This made local bank loans a challenge. So, ECB has become the favoured route.”
Companies such as Xiaomi have reported that as much as `4,820 crore of its money is held up in India as of September since local authorities have attached the bank accounts of its India subsidiary. “The cases are currently at the hearing stages and not yet concluded,” the company said in its last earnings report.
Haier Appliances India has sought — but hasn’t received yet — PN3 approval from the Department for Promotion of Industry and Internal Trade for a fresh infusion of `1,000 crore by its parent, according to its recent filing. Haier needs funds to set up a third factory in India and in absence of PN3 approval, is pursuing a stake sale in its India subsidiary to Bharti Group.
India’s largest smartphone maker, Vivo Mobile India, said in an RoC filing of August that proceeds from ECBs are used for working capital, general corporate purposes and capital expenditure for its plants. The company’s ECBs as of FY24 amounted to `1,668 crore, albeit down from `2,875 crore in FY23, the filings show.
Oppo Mobiles India’s latest filing also reveals that it received a non-current unsecured ECB from a related party — Grand King Ltd, an Oppo subsidiary based in Hong Kong — of `1,667 crore and a working capital loan of `414 crore from HSBC Bank in FY24. In FY23, ECBs from related parties stood at `3,699 crore. Oppo India had a current ECB from Grand King of `2,084 crore in FY24.
FY25 figures for the above-mentioned firms haven’t been filed yet. Chinese brands dominate the Indian smartphone market. Market tracker IDC India’s latest report says eight of the top 10 smartphone brands in India are Chinese, the other two being Samsung and Apple.
(You can now subscribe to our Economic Times WhatsApp channel)
(Catch all the Business News, Breaking News and Latest News Updates on The Economic Times.)
Subscribe to The Economic Times Prime and read the ET ePaper online.
...moreless
(You can now subscribe to our Economic Times WhatsApp channel)
(Catch all the Business News, Breaking News and Latest News Updates on The Economic Times.)
Subscribe to The Economic Times Prime and read the ET ePaper online.
...moreless