Few weeks back, Indian Government changed their foreign direct investment policies stating that any investment from companies that come from countries that share borders with India will have to go through the Government. This has massively impacted the startups as Chinese investors have been huge contributors to their funds.
According to sources, the investors have already started withdrawing term sheets and are waiting for any new information from the government’s end. Investors like Shunwei Capital, Fosun RZ Capital, CDH Investments, Hillhouse Capital, Alibaba Group and Tencent Holdings among others have been investing actively in Indian firms and have emerged as largest dealers in capital.
These companies have invested in big Indian startups like Byju’s, Paytm, Dream11 and Ola but with this policy, now their investment will come under the government’s eye. The investors have been waiting for more clarity from the government and this has made it harder for the companies to procure funding.
They are demanding a more investment friendly environment and if the situation remains the same, they will move their attention to other developing Economies like Indonesia and Vietnam. Chinese investors have invested approximately $6 billion in Indian startups and the first quarter of 2020 alone saw $2.2 billion investments.
The government’s policy has brought Indian companies in scrutiny of Chinese businessman. The investors expect government to roll out a new fast-track plan for early investments considering the amount involved in them. GoI should definitely look into this as the road ahead doesn’t seem smooth for the Indian Startup ecosystem.