Of India and China’s tech companies, the differing trajectories
India’s startups have stormed the financial markets. After Zomato’s successful listing, Policy Bazaar and PAYTM India have lined up billion-dollar Initial Public Offerings (IPOS). They are part of the nearly 60 IPOS scheduled for a 2021 listing, and their success may encourage more to emerge.
Many more in the unlisted space have raised capital privately, with an unprecedented 26 startups joining the unicorn club – crossing the $1 billion valuation mark. These numbers change by the week. August ended with a big-bang all-cash acquisition of fintech startup Billdesk for $4.7 billion.
This is in striking contrast with China, where the brightest and best in the tech sector are struggling against multiple waves of a government-driven crackdown.
India’s economic divergence with
China, which began with restrictions on investments in April 2020, will widen due to China’s restrictions on its own tech majors. In the past year, Indian tech companies have belied fears that reduced Chinese funding will hurt this highgrowth sector. The circumscription in China is likely to scare off foreign capital, some of which may find its way to India, further offsetting the lower capital flow from Chinese investors.
Historically, Indian tech startups have relied on foreign capital as their funding requirements increased. Domestic venture capital hasn’t had the capacity to provide risk capital of $50 million-$100 million to unproven business models. This role has been filled by foreign capital, especially funds such as the Unites States’s Sequoia and Japan’s Softbank; companies such as Alibaba, Tencent and Facebook; and super-rich individuals, usually tech billionaires.
The last category is especially important – entrepreneurs who have made it big in tech are more willing to back untested ideas with their personal capital. In the Indian context, a good example is Sanjeev Bikchandani’s Info Edge, a dot-com era success, which was an early investor in Zomato. The initial investment of ₹4.7 crore is now worth over ₹10,000 crore. These are not bets traditional business houses can easily make. can help create two new categories of in tors — Indian tech majors and Indian tech lionaires, both largely non-existent n India’s software giants reinvested in t existing business models but did not inve the broader tech ecosystem. The new t mostly e-commerce, billionaires, a larger of investors, will further offset the mis Chinese investors.
China’s own tech sector is facing h winds. The Chinese Communist Party ( has fettered its tech majors — Alibaba, cent and Didi Chuxing among others. baba’s founder Jack Ma vanis mysteriously for several months has been lying low since. Subsid Ant Financial and the group fined $2.8 billion for abusing ma dominance, all within month Ma’s criticism of China’s finan regulator. Tencent, China’s most uable company, stopped registra of new users on Wechat, a Chi messaging service similar to W sapp. Ditto with Didi Chuxing, a China-b ride hailing company similar to Uber.
There have long been question mark the true ownership and control of Chi companies, and whether the Chinese pri sector is truly private. The crackdown raise further questions on actual control in the longer term, may also alienate wes investors who have funded and champio many of these companies. With their va tions and future access to capital dipp their progress could slow down. Greater o sight by the CCP will also likely cripple i vation.
To lure some of the available capital, I must get its house in order. India still has nificant regulatory hurdles with issues ging from land acquisition to the rece reversed retrospective taxation. If these be lowered to the level of merely being some, then the IPO train can speed up, gi India a chance to truly become a signifi global tech player.
Amit Bhandari is fellow for En Gateway House: Indian Council on Gl Relations and author of the report, Chi Investments in India and India’s Neighbour