The recently amended FDI rules and the straining relationship following the recent border conflict between India and China are likely to add roadblocks for Chinese investments in Indian start-ups, according to data and analytics company GlobalData.
GlobalData said Chinese investors have been making their presence felt in a big way in the Indian start-up ecosystem over the last few years.
With the amended FDI regulation, companies heavily backed by Chinese investments are in a state of uncertainty for capital raising, GlobalData said in a statement.
Some start-ups that are backed by Chinese investors like Alibaba and Tencent include BYJU’s, Ola, Paytm, Zomato, Swiggy, Delhivery, Dream 11, Hike, MakeMyTrip, Oyo, Quikr, Snapdeal, Udaan and Bigbasket.
GlobalData Lead Analyst Aurojyoti Bose said –
While the new law (FDI curbs) entails investments to be scrutinised and not necessarily stopped, this move is largely seen as a measure to curb Chinese investments and is likely to have a detrimental impact on start-up ecosystem for developing economies such as India given the fact that Chinese companies have traditionally been the lead investors in some of the key start-ups in India, which also enabled these start-ups to scale up
In April, the Department for Promotion of Industry and Internal Trade (DPIIT) had said a company or an individual from a country that shares land border with India can invest in any sector here only after getting government approval.
“On the other hand, though China has been enhancing its prominence, American firms still continue to dominate the funding landscape in India and with the amended FDI regulation and recent escalation of border dispute, Indian start-ups are more likely to turn towards such non-Chinese investments,” Bose said.