India-Canada row: Start-ups, IT firms to shrug off diplomatic spat
Experts say even if this escalates into protracted diplomatic spat, effect would be modest
BENGALURU : Amid worsening diplomatic ties between India and Canada, experts feel it may not be a cause of concern at the moment for start-ups and IT companies, irrespective of their huge presence in Canada. Top Indian IT services companies have business operations in Canada. Infosys has more than a decade presence in the country.
In July this year, Infosys Public Services (IPS), a North America-based company of Infosys, announced the opening of its new subsidiary, Infosys Public Services Canada, headquartered in Ottawa, Ontario.
The company had said in a statement that the IPS Canada announcement is the latest development in a series of investments made by Infosys which has expanded the employee count to over 7,000 with a commitment to increase to 8,000 employees by 2024. IPS Canada will also work with local universities and technical colleges to recruit talent.
In September 2022, Infosys opened its digital centre in Calgary, Canada, and it said this would bring 1,000 jobs to Calgary over the next two years.
Wipro in January this year opened the Wipro-AWS Launch Pad Centre in Toronto, Canada. While opening the centre, the company had said that Toronto serves as a prime location to enable co-creation across industries given the ongoing technology expansion and investments in the city, which is now the third largest tech hub in North America.
Apart from centres, IT companies have partnered with many Canadian firms. Tata Consultancy Services has partnered with Canadian business jet maker Bombardier to help the company drive digital transformation. Last year, TCS partnered with Payments Canada, the country’s largest payment organisation, to transform its payment system operations and help implement the Real-Time Rail (RTR), the new real-time payments system.
“At this time, it’s not a huge issue, more of a conversation of interest and not of significant concern but worth keeping an eye on. We do not see it significantly affecting the tech services industry unless this goes on for months,” Peter Bendor- Samuel, CEO of Everest Group, a research firm, told this newspaper.
If it turns out to be an intense but brief diplomatic spat, business will shrug this off. If it stretches out for months then it may affect the Indian firms’ ability to do work in Canada. However, even if this were to escalate into a protracted diplomatic spat, the effect would be modest, he added.
The CEO of Everest Group also said that there has been a lot of talk and marketing in Canada, however, it’s a relatively high-cost location vs Mexico, Eastern Europe and South America. Hence, there are not huge teams in Canada relative to other nearshore locations. IT industry’s apex body Nasscom said that they are in close touch with its members in Canada and as per their feedback there are no immediate areas of concern. “Since this is an evolving situation, we will continue to engage with stakeholders to track any potential areas of impact that may need support,” it said.
Start-ups’ association with Canada
Canada Pension Plan Investment Board (CPPIB) has made investments in many Indian start-ups including Byju’s, Delhivery, Flipkart and Paytm, among others. In May this year, general insurance company Acko raised an undisclosed amount from investors including CPP Investment Board.
According to Tracxn data, CPP Investment Board has 3.6% stake with cumulative investment of Rs 292 crore in Acko. In Byju’s, it has 3.4% stake with cumulative investments of Rs 1,456 crore. In Flipkart, its cumulative investments stood at Rs 6,663.50 crore.
No doubt IT firms and start-ups will exercise caution in light of recent developments with business interests and offices in Canada, says Bhaskar Majumdar, Managing Partner, Unicorn India Ventures.
He believes that there is no immediate cause for any big concern. “Given the visa suspension, we expect that Canada may be quickly replaced with other competitive markets like Australia and the UK. Another reason, the ban can’t be long term is because several Canadian Pension funds have been investing for a while and they cannot afford not to play a role in the India growth story. Brookfield, for example, is one of the biggest investors in Indian infra and real estate.”
Manoj Agarwal, Managing Partner, SeaFund VC, says, CPPIB is one of the larger investors in listed entities like Zomato and Nykaa with an investment to the tune of Rs 1.3 lakh crore and other large such large Canadian funds, who have an investment view of India are likely to suffer as much the start-ups here.
The ongoing tension could also impact Indian start-ups and IT companies that are using Canada as a base to enter the US. Indian software companies have made significant investments in Canada and created job opportunities. Indian start-ups previously saw Canada as an attractive bridge into North America. However, given the present circumstances, alternate locations like GIFT City, Dubai, or even Delaware seem more promising. These hubs offer a sense of security and policy stability that businesses crave, said Anirudh A Damani, Managing Partner, Artha Venture Fund. Experts also said that the impact will depend on how long this tension lasts between the two countries.