Will India benefit from the Chinese Breakdown

As per the latest news, the recent crackdown by China on tech companies may be fruitful to India as global wealth and funding usher to India’s way. Due to the new regulatory frameworks, Chinese tech stocks have gone through a drastic erosion of $1.5 trillion. According to the reports, during the August 14-21 week, $560 billion worth of market value had been erased from the China and Hong Kong exchanges.

 

The current crash has affected a large number of startups, including popular edtech platforms in China. According to the new regulatory framework, Chinese firms that were availing online tutoring on subjects taught in school will no longer receive foreign investment. Additionally, listed companies in China won’t be able to raise funding through the stock markets to invest in businesses that take up school/classroom subjects for teaching. Other crackdowns have notable effects on food delivery platforms, apps streaming music, gaming and bike sharing apps. Public listings of reputed companies like Ant Financial and ride-hailing app Didi were also put off after the reviews given by the regulators in China.

The Personal Information Protection Law has also been passed by China, which is supposed to be implemented from November 1. The law consists of rules about enhanced storage of user information and data and conditions according to which firms can gather data. These rules are framed to protect data of citizens when it is used outside China.

As per expert’s observation, the fact being China – a bigger funding recipient compared to India, changes in regulatory framework or ban in that country will now benefit India. This is clearly seen in data of news reports; it states that the value of deals (VC) increased to $7.9 billion in India for the month of July. While investments in Chinese firms showed a downfall to $5 billion.

The world’s biggest edtech market – China edtech startup market (K-12 grades) is reported to be worth $31 billion. While the Chinese government is taking a toll on this market and reframing rules, India, can surely benefit post pandemic in the stream of online education. Reports state that the Indian edtech startup world has successfully raised $1.9 billion between January and early August. In 2020, the Indian edtech startups had raised $2.2 billion.

India stands third in market for startups following United States and China. Till date in 2021, 25 fresh unicorns have been recorded in India and over $20.75 billion has been raised in deals between January and August 20, 2021. 12 firms had been termed unicorns and $11 billion was invested in startups in India in 2020.

According to reports, in the first six months of the calendar year 2021, Indian startups have successfully raised more than $12 billion from private equity (PE) firms and venture capitalists. The high valuations and the ascendance in fundraising have been driven by a huge liquidity surge. The IPO boom is expected to drive greater PE and VC funding to Indian startups, as both private/VC funding are the requisite for a startup ecosystem to bloom. The stock market in India has noticed more than 40 IPO listings in 2021; as of August 20, 23 firms have filed their initial documents with SEBI. These include many tech startups like online insurance marketplace Policybazaar and online beauty products platform Nykaa.

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