Checks on Chinese investments likely to keep Indian start-ups on tenterhooks
The Indian government has earlier announced that foreign direct investments (FDI) from countries that share a land border with India would go through only after its approval. This will specifically impact consumer internet and tech-enabled businesses significantly and across stages, says Pankaj Raina, Managing Director, Research and Investments, Zephyr Peacock India.
Raina added that existing investee companies may not be able to raise internal rounds from Chinese investors, which could create cash-flow issues.
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Below is an excerpt from the post which first appeared on Business Line on 18 June 2020:
The gruesome India-China border clash along the Line of Actual Control (LAC) delivered a body blow to the already strangled equations between the two countries.
Not long ago, the Indian government had also announced that foreign direct investments (FDI) from countries that shared a land border with India would go through only after its approval. These factors could affect the Indian start-up ecosystem, which has been receiving Chinese investments, said investors.
It will specifically impact consumer internet and tech-enabled businesses significantly and across stages, said Pankaj Raina, Managing Director, Research and Investments, Zephyr Peacock India, a firm that provides growth capital and management support to small and mid-sized enterprises in the country. He added that existing investee companies may not be able to raise internal rounds from Chinese investors, which could create cash-flow issues.
There are nearly 118 Indian start-ups — companies that received funding when they were less than 10 years old — that have a total of $5.6 billion un-exited Chinese investments, as per data from Venture Intelligence, a firm that tracks private companies’ investments, financials and valuations. But with the scrutiny in place now, experts estimate that the amount of time to raise further capital from Chinese investors will get extended.
