January 24, 2021

Chinese FDI Decrease While International FDI Increases

India has a burgeoning startup system comprising more than 50,000 companies. Though many of these will fail, there are numerous unicorns set to catch fire, and each day, the system sees two to three new entries. Foreign investors have always played a role in the development of Indian businesses, and as the year went by, things were not any different. While speaking at the US India Strategic Partnership Forum, Prime Minister Narendra Modi stated that India had received over $20 billion in foreign direct investments in 2020.

However, what is different now is that the number of investors from China has declined.  In April, India joined several other countries that sought to protect domestic companies from international take-overs by implementing investment restrictions. The current global crisis has caused companies’ valuations to decrease, making them susceptible to foreign take-overs. Thus, the central Indian government mandated that all foreign investments from countries sharing a land border with India must have government approval. The move comes amidst suspicions about China’s investment strategies and their underlying security concerns.

The top five startups in India all have Chinese investors, and giants such as Tiger Global and Alibaba also back very prospective up-and-comers. However, access to Chinese capital is now limited. Thus, companies are trying to look at other markets for funds. While the country’s economy is in shambles, investors from the US, Singapore, Japan, and West Asia have decided to bet on Indian fledgling companies. The main reason why this is happening is that India has a large internet user base, set to hit the one billion mark within seven years.

Foreign Lottery Operators Gain Traction in India Via Mobile Apps

Lottery operators are among the many foreign companies that are trying to get a foothold in India. Though many people may think that lotteries are a passé pastime, that is not true, these games are more popular than ever, and nothing legally stops Indian players from participating in international draws. Their appeal lies in the massive prizes available, sums far more substantial than those offered by Indian state-run games.

The global market for online lotteries hovers around $7 billion, and it should reach a revised size of $11 billion in 2027. Foreign operators are now trying to expand their presence on the Indian market by making available lottery apps in India. These apps are dedicated software compiling the latest lotto news and results from different draws. They allow users to purchase tickets for the US Powerball and MegaMillions, and the European EuroMillions, all of which have jackpot prizes in the hundreds of millions of dollars. Lottery apps also send notifications about the latest discounts, promo deals, and they provide lottery schedules.

Foreign Investors Focus On Tech Startups

We mentioned that according to one estimate, there are around 50,000 startups in India. Out of that number, about 9,000 operate in the tech sector. Paytm, Oyo, and Swiggy all have Chinese investors, while Google and Facebook infuse millions in Reliance Industries-led ventures every year. Since the Indian IT sector has been thriving during this past decade, and with most rising companies depended on government support, it should come as no surprise that many have turned to foreign investors. According to publicly available information, there are thirty so-called unicorn startups in India, ones with massive turnovers. Eighteen of these thirty operate thanks to foreign direct investments.

The crucial factor why most up-and-coming tech companies fail is because they rely on outdated business models. Ironically enough, one of the main reasons why Indian investors choose not to pour money into Indian companies operating in this sector is because they are unwilling to trust non-traditional business models. Nowadays, tech companies spend far more funds on human resources and marketing than on tangible assets. Something that most old-school entrepreneurs find inconceivable. Almost 80% of all venture capital investments made in India are in four sectors, software, consumer tech, fin-tech, and business-to-business commerce.


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