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Chinese investors bet big on India
That looks set to change significantly given the spate of
announcements in the last few weeks. Wanda, China's largest commercial real
estate developer, announced investment worth $10 billion in Haryana. SAIC
Motor, China's largest carmaker, proposes to buy GM's Gujarat facility. About
100 small and medium Chinese enterprises have promised investments worth $1
billion.
In the startup space, Chinese companies are no more restricted to proposals, but have been making aggressive and widespread investments. The new year began with China's online travel company Ctrip picking up a strategic stake in Makemytrip and Baidu unveiling discussions with multiple Indian internet startups for investments. This comes in the backdrop of Alibaba's high profile investments in Snapdeal and Paytm last year. Another Chinese internet giant Tencent Holdings started investing when it took a wager on Bangalore-based healthcare startup Practo last year.
The drought is turning into a deluge. For years, Chinese
investment in India remained a trickle — $1.2 billion between 2000 and
September 2015, which was only 0.47% of the total foreign direct investment
inflow. While China became India's largest trading partner in 2008, investment
flow from the country remained hostage to national security concerns.
Chinese internet companies have recognized the big potential in India's digital startups where there are similarities in learning curves and experiences," Frank Hancock, managing director, advisory, Barclays said. He pointed out that the broader FDI investments have pivoted towards the east with Japan competing with the US and the UK among the top three sources of capital. "In that context, the incremental Chinese private investments are important from a signaling perspective," Hancock said.
A recent Credit Suisse report highlighted that India's internet and e-commerce journey bears close similarity with that of China, with a lag of 8-10 years. "The presence of such investors on the boards of investee companies enables access to insightful market advice and winning business models," said Anup Vikal, CFO, Snapdeal, which has attracted investments from Alibaba, Taiwan's Foxconn and Japanese telecoms & internet giant Softbank.
Besides the strategic investors, Hillhouse Capital, one of the largest China-based investment funds, picked up a stake in online classifieds player Cardekho last year, and took positions in the domestic public markets. More significant, though little known, are the investments by State Administration of Foreign Exchange (SAFE), a fully-owned subsidiary of People's Bank of China, in some of India's pedigree large cap stocks. SAFE, entrusted with managing China's estimated $3.5 trillion foreign reserves, started taking positions in Indian public equities at least two quarters back, several top bankers in Mumbai said in recent conversations.
Between January 1, 2015 and January 22 this year, investors from Asia chose 48 Indian startups to provide financial backing. The 22 companies, from countries including Japan, China, South Korea, Taiwan, Singapore and Malaysia, participated in funding rounds worth $3.4 billion in this period. Chinese companies Alibaba, Tencent, Ctrip, Didi Kuaidi, Hillhouse Capital and Tybourne (Hong Kong) were significant investors.
Most of China's cash reserves are said to be invested in dollar and euro denominated assets though it has started taking risk exposures in other geographies as well. While Chinese investor interest around Indian internet startups has gathered momentum, it is yet to translate into other sectors which the dragon has eyed for some years now.
Take, for instance, Fosun, arguably, the largest Chinese private conglomerate and the most active overseas acquirer. Fosun -- with interests spanning from pharma to real estate to internet -- started scouting for investments in India more than two years ago but hasn't struck any deals yet.
This is where some bankers forsee "the mutual dislike" between Indian and Chinese businesses, which are rooted in cultural differences and historical prejudices. "Private businesses in the two countries vary vastly, and love to look down upon each other," a senior banker said on condition of anonymity. Then there are whispers about India preferring neutral money from Japan and Canada to build its infrastructure.
Chinese internet companies have recognized the big potential in India's digital startups where there are similarities in learning curves and experiences," Frank Hancock, managing director, advisory, Barclays said. He pointed out that the broader FDI investments have pivoted towards the east with Japan competing with the US and the UK among the top three sources of capital. "In that context, the incremental Chinese private investments are important from a signaling perspective," Hancock said.
A recent Credit Suisse report highlighted that India's internet and e-commerce journey bears close similarity with that of China, with a lag of 8-10 years. "The presence of such investors on the boards of investee companies enables access to insightful market advice and winning business models," said Anup Vikal, CFO, Snapdeal, which has attracted investments from Alibaba, Taiwan's Foxconn and Japanese telecoms & internet giant Softbank.
Besides the strategic investors, Hillhouse Capital, one of the largest China-based investment funds, picked up a stake in online classifieds player Cardekho last year, and took positions in the domestic public markets. More significant, though little known, are the investments by State Administration of Foreign Exchange (SAFE), a fully-owned subsidiary of People's Bank of China, in some of India's pedigree large cap stocks. SAFE, entrusted with managing China's estimated $3.5 trillion foreign reserves, started taking positions in Indian public equities at least two quarters back, several top bankers in Mumbai said in recent conversations.
Between January 1, 2015 and January 22 this year, investors from Asia chose 48 Indian startups to provide financial backing. The 22 companies, from countries including Japan, China, South Korea, Taiwan, Singapore and Malaysia, participated in funding rounds worth $3.4 billion in this period. Chinese companies Alibaba, Tencent, Ctrip, Didi Kuaidi, Hillhouse Capital and Tybourne (Hong Kong) were significant investors.
Most of China's cash reserves are said to be invested in dollar and euro denominated assets though it has started taking risk exposures in other geographies as well. While Chinese investor interest around Indian internet startups has gathered momentum, it is yet to translate into other sectors which the dragon has eyed for some years now.
Take, for instance, Fosun, arguably, the largest Chinese private conglomerate and the most active overseas acquirer. Fosun -- with interests spanning from pharma to real estate to internet -- started scouting for investments in India more than two years ago but hasn't struck any deals yet.
This is where some bankers forsee "the mutual dislike" between Indian and Chinese businesses, which are rooted in cultural differences and historical prejudices. "Private businesses in the two countries vary vastly, and love to look down upon each other," a senior banker said on condition of anonymity. Then there are whispers about India preferring neutral money from Japan and Canada to build its infrastructure.
Still, there isn't much doubt that
China, and broadly the east, is becoming a large source of capital for new-age
Indian entrepreneurs. "So far the US internet companies have had a lock on
the India market. However, about a year ago, the Chinese internet conglomerates
started to stitch things together in India with strategic bets. Their approach
is very long-term which bodes well for Indian startups who were dependent on
very few deep-pocketed funds for writing the larger cheques," says Avnish
Bajaj, MD at Matrix Partners India, an active investor in early stage tech
companies like Quikr, Practo and Ola among others.
Hancock of Barclays said he would expect Chinese investors to top up their US counterparts. "I would see large Chinese private investments in the country's internet leaders which are already vetted by US venture capital and private equity funds," he explained, suggesting a slightly cautious Chinese action in a sector where Japan's SoftBank has become a prolific investor.
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