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Border tension puts startups’ Chinese fund in a fix

The investments, other than in sensitive sectors and takeover/majority stake, should happen normally after a certain  period of time.

Published: 19th June 2020 10:29 AM  |   Last Updated: 19th June 2020 10:29 AM   |  A+A-

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Visual of Indian and Chinese flag used for representational purposes (File | AFP)

Express News Service

NEW DELHI: The ongoing border stand-off have cast aspersions on Chinese investments in Indian start-ups — currently third largest economy in the world. With an exception of the last few quarters, investments from China in India’s new age firms doubled at nearly $4 billion in 2019 compared to a year ago.

However, as per the Chinese official data, funding in the tech start-ups in India dropped by nearly 55 per cent in Q4, 2019. So far, the start-ups have raised $5.8 billion from Chinese venture capitalists (VCs).

The double whammy of coronavirus and anti-Chinese sentiments brewing in India , according to analysts is going to slow down fundraise from China in the short to medium term, and the impact may be more on large unicorns which have Chinese VCs as biggest backers. Nearly half of the unicorns start-ups in India (18) have raised funds from Chinese investors in the recent past including Paytm, Zomato,Flipkart, BigBasket,Udaan where investment firms Alibaba, Shuwei Capital, Tencent have remained active.

K Ganesh, serial entreprenuer and promoter in start-ups like BigBasket, Hunger Box and Portea Medical told this publication that although overall investments in Indian firms by Chinese VCs would witness a decline in next few months, the impact may be lesser on sectors other than defence and manufacturing since Chinese firms do not own a controlling stake in these companies.

“After the government announced modification in FDI rules regarding investments by neighbouring countries including China, the investors were already wary of putting their money into India. The requirement of regulatory approval was already a roadblock in the process.

The investments, other than in sensitive sectors and takeover/majority stake, should happen normally after a certain  period of time. Most start-ups are currently in the phase of being raising only a small percentage of funds from China VCs and should be able to weather the storm for time being,” Ganesh added. Besides, the intelligence agencies have reportedly also furnished a list of 52 apps such as Tik Tok, WeChat, UC Browser, Shareit, ClubFactory through which data breach can take place.

“Over the last few years, the Chinese funds have been active in Indian markets and we have not had investors from economies like UK, UAE. China, on the other hand, has been building its internet economy in a different way while  tapping the Indian market,” Dheeraj Jain, Angel investor and founder, Redcliffe Life Sciences said, adding the immediate impact will be definitely felt across the start-up sector especially at a time when funds were drying up and demand has slowed.



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