A part of the Chinese giant Alibaba Group, Ant had used the term to describe his 30% stake in the Noida headquarters Communications One97, which is the parent company of the widely used Paytm micropayment system. That Alibaba has a financial interest in Paytm It is not new. He had invested around $ 1.2 billion in the company in 2015, which gave him around 45% stake. Over time, their share has dropped by a third.
The trigger for the attention was the ongoing tension between India and China, which has caused people to scrutinize everything Chinese. That is despite the fact that China is India’s largest trading partner and its companies have invested billions of dollars in India. Chinese funding has gone to large private companies such as HDFC Bank and ICICI Bank, and to dozens of startups including Paytm and MakeMyTrip.
“’Significant influence’ is just an accounting term, which means that the investor has more than 20% equity investment in an organization. It does not imply anything about the nationality of a company, ”Paytm president Madhur Deora told TOI. “They have no influence on our daily business decisions and operations. Paytm is as Indian as Maruti and HDFC, and we are proud to be a local success story. ”
For example, India’s largest automaker Maruti Suzuki (formerly Maruti Udyog) is a 56.2% subsidiary of the Japanese auto giant Suzuki and different foreign institutions own more than 30% stake in the private sector bank plus valuable country, HDFC Bank. “Foreign investors have no say in the day-to-day operations of these companies,” said a leading banker. “Most of these investors invest to make money and move on. By the way, 26% of Ant Group is owned by the Japanese company SoftBank. Does that make Ant Japanese? Did not say.
Given the scarcity of local funding, Indian startups are highly dependent on foreign investment, mainly from the US, Japan, China and Hong Kong. Among the 65 largest startups in India, 31 have received funding from China and Hong Kong, according to a study by the Research and Information System for Developing Countries (RIS).
“All companies incorporated in India are governed by Indian laws and regulations. Paytm takes these obligations to our nation very seriously, ”said Deora. “We have invested billions of dollars in increasing financial inclusion, created tens of thousands of jobs, and pioneered the digital payments ecosystem in India.” She added: “We have been fortunate to have leading investors from around the world and we learn from their vast experience. They have no influence on our daily business decisions and operations. ”
Besides Ant, SoftBank and SAIF Partners are currently the other large shareholders of One97 Communications with stakes of around 19% and 18% respectively. Founder of Paytm Vijay Shekhar Sharma has about 14% in the company.
Certainly, some companies have had to maintain or revise financing plans after tensions with China began to emerge. For example, Ant has yet to invest $ 100 million of the $ 150 million financing it announced earlier this year for the online food delivery and restaurant discovery platform Zomato. Many startups and investors expect more clarity from the government. This is especially critical for startups that already have investors from China and need to capitalize even more.
In the early stages, where startups raise capital of up to $ 10 million, the impact of the pullback from Chinese funds is not significant. But mid-stage and later-stage companies – some of them unicorns or startups valued at more than $ 1 billion each – will feel the impact.
Some investors feel that funds from other parts of the world will start to make up for the pause in Chinese inflows. “We may see a temporary withdrawal of Chinese capital from the ecosystem, and certain sectors such as consumer internet (grocery, delivery, e-commerce) may see a continued impact until early 2021. However, based on the winds of queue and momentum that Indian startups continue to show, we are seeing new growth funds coming from North America, Europe and Southeast Asia who believe in the promise and performance of the Indian story, ”said Sanjay Nath, Managing Partner from early-stage investment firm Blume Ventures.
However, a downside to restricting Chinese investments could be that Indian startups may lose a closer understanding of how companies were built and scaled up in China, which has more demographic similarities to India than to the US. , Especially in sectors such as electronic commerce, mobility and payments.
(With input from Madhav Chanchani)
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