Companies rush to invest in Indian start-ups

India is the next land of possibility for Chinese companies hoping to replicate their success abroad, but they need to find new business models to survive, experts said Thursday.

An Indian vendor makes sandwiches next to a sign for PayTM online payment method at a street stall in Bengaluru, India. (Photo: VCG)

"Though we cannot say China's investment future definitely lies in India, the country indeed has numerous opportunities for Chinese investors, and cooperation potential between the two countries is great," said Qian Feng, a researcher at the Chinese Association for South Asian Studies in Beijing.

The comment came after a slew of Chinese companies have invested in technology-based Indian start-ups in recent days.

CashBUS, a Shanghai-based microfinance company, led a $1 million investment in Indian online fashion resale marketplace CoutLoot in April 2018.

The company noted on Thursday that its incubator Jadevalue Fintech also has been in contact with New Delhi-based venture Gurukool, but didn't disclose details of their cooperation.

According to a report on Indian information platform Inc42, four of the top five Indian tech start-ups - Delhivery, BYJU'S, BigBasket and OYO - have received investment from Chinese companies. India's top five, which also include CarTrade, are likely to become "unicorns" by 2020.

In February 2018, Alibaba led $300 million in funding into Indian online grocer BigBasket, after which the Chinese e-commerce giant became its largest shareholder.

Considering the current positive political situation between the two countries, Chinese investment into India is expected to get a boost this year, Qian told the Global Times.

"The two countries have achieved wide consensus over the bilateral relationship, such as promoting regional cooperation, and a serious standoff is unlikely, so Chinese companies operating in India will not be impacted," he said.

"We warmly welcome Chinese investment in Indian start-ups," Atul Dalakoti, Executive Director for China of the Federation of Indian Chambers of Commerce and Industry, told the Global Times on Thursday.

Given India's huge market and growing connectivity, investing in start-ups in India promises excellent yields, Dalakoti said. "India's economic landscape is similar to China, both having fast growth and large populations. Thus, it's easier for Chinese internet companies, which have matured fast in China and have higher market valuation, to replicate their success in the Indian market," he noted.

Chinese investment into technology-based Indian start-ups has focused on accommodation, e-commerce, digital payments and transportation, Dalakoti said, noting Chinese companies need to find new business models to survive in an increasingly competitive market.

In May 2017, Shenzhen Stock Exchange (SSE) and Bombay Stock Exchange signed a memorandum of understanding to jointly boost capital market cooperation. 

The two exchanges will carry out capital market cooperation based on the docking of cross-border financing and investment, according to a statement on the SSE website.

In addition to the internet sector, emerging sectors in India such as smart cities, property development and education have good investment opportunities, Qian said, adding that the Indian central government and local governments "positively welcome" Chinese investment.

However, Chinese investors in India should prepare well, Qian said. "Before investment, they should carry out careful investigation and get a deep understanding of local laws and regulations. Meanwhile, they should choose reliable partners, abide by the local culture and make preparations for security issues in advance," he warned.