India sees a boom in unicorns as investors are spooked by China’s Big Tech crackdown

India’s biggest start-ups like Zomato, Paytm and Flipkart are either going public or raising record amounts of cash

India, with 625 million internet users, is considered the next big market after China, which is in the midst of a harsh crackdown on its tech giants

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A Zomato delivery rider on a motorcycle in Mumbai, India, on July 16. Zomato became India’s first unicorn to list on a stock market with a US$1.3 billion initial public offering. Photo: Bloomberg

Published: 11:05am, 19 Jul 2021Updated: 11:05am, 19 Jul 2021

Last week marked a watershed for technology start-ups in India, as a record bout of fundraising shifted attention to the world’s second-most populous market, just as investors were becoming spooked by a crackdown on internet companies in China.

Food-delivery app Zomato Ltd became the nation’s first unicorn to make its stock-market debut, raising US$1.3 billion with backing from Morgan Stanley, Tiger Global and Fidelity Investments. The parent of digital payments start-up Paytm filed a draft prospectus for what could be India’s biggest IPO at US$2.2 billion, while retailer Flipkart Online Services Pvt raised US$3.6 billion at a US$38 billion valuation, a record funding round for an Indian start-up.

“Indian entrepreneurs have been quietly building start-ups for a decade now, the country’s internet infrastructure has vastly improved in that time and there’s a very good appetite for tech stocks globally,” said Hans Tung, the Silicon Valley-based managing partner of GGV Capital, which manages US$9.2 billion in assets. “Investors are beginning to see the huge upside and they expect India to be a China.”

Unlike China, where online usage is much more developed, many of India’s 625 million internet users are just dipping their toes into the world of video streaming, social networking and e-commerce. Opportunities in online shopping are particularly attractive, as e-commerce accounts for less than 3 per cent of retail transactions. Tech start-ups in India are still paying to build supply chain and delivery networks.

India’s population is expected to overtake China’s this decade and the mood now among investors could not be more different in the neighbouring nations. China is reining in its tech companies, wiping over US$800 billion off market valuations from a February peak and shaving billions off the net worth of its most famous entrepreneurs. This month, the government abruptly pulled ride-hailing service Didi Global Inc from app stores, months after regulators forced Jack Ma’s Ant Group Co to halt a blockbuster IPO at the eleventh hour. The clampdown is expected to continue, as regulators curb the power of internet companies and wrest back control of user data.

Indian tech companies “can attract global investors who’ve burnt their hands in Chinese tech companies”, said Nilesh Shah, group president and managing director at Kotak Mahindra Asset Management Co in Mumbai. The successful listing of a few loss-making start-ups could lead to re-rating of many existing companies and send the market higher, he said.

Record funding

India had a record US$6.3 billion of funding and deals for technology start-ups in the second quarter, while funding to China-based companies dropped 18 per cent from a peak of US$27.7 billion in the fourth quarter of 2020, according to data from research firm CB Insights.

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