Traders seek scrutiny of Chinese companies’ investments in Indian start-ups

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Published: July 1, 2020 5:10 AM

“Chinese companies that have set up their manufacturing plants in India should also be investigated whether the data they have accrued is not either being misused or sent to China,” CAIT said in the letter.

In a letter to finance minister Nirmala Sitharaman on Tuesday, CAIT pointed out that a handful of start-ups including Swiggy, Zomato, Oyo, Ola and Byju’s are backed by Chinese investors.In a letter to finance minister Nirmala Sitharaman on Tuesday, CAIT pointed out that a handful of start-ups including Swiggy, Zomato, Oyo, Ola and Byju’s are backed by Chinese investors. (File image)

A day after the government banned 59 Chinese apps “in view of information available they are engaged in activities which are prejudicial to sovereignty and integrity of India”, the Confederation of All India Traders (CAIT) has urged authorities to investigate investments made by Chinese companies in Indian start-ups.

The association said the scrutiny should be done to ensure that the data collected by the start-ups is not transferred to Chinese investors and that no “foul play is taking place under the garb of investment”.

In a letter to finance minister Nirmala Sitharaman on Tuesday, CAIT pointed out that a handful of start-ups including Swiggy, Zomato, Oyo, Ola and Byju’s are backed by Chinese investors.

“Chinese companies that have set up their manufacturing plants in India should also be investigated whether the data they have accrued is not either being misused or sent to China,” CAIT said in the letter.

According to a recent report by data and analytics firm GlobalData, Chinese investment in Indian start-ups grew 12 times over the past four years to touch $4.6 billion in 2019. Investments stood at around $381 million in 2016.

Most Indian VC (venture capital) financiers are wealthy individuals/family offices and cannot make the $100 million commitments needed to finance start-ups through their early losses. That leaves Western and Chinese investors as the dominant players in the Indian start-up space, analysts said.

A blockade on Chinese investments will deal a further blow to start-ups at a time when they are already struggling to raise funds amidst the pandemic. According to a report by Nasscom, nearly 92% start-ups are facing revenue decline while almost 70% have a runway of less than three months.

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