Indian tech thrives as investors seek China alternative

Venture Capital (VC) funding for Indian startups reached record levels in July, surpassing Chinese VC flows for the first time in history.

Experts have attributed the record capital in-flows to intensifying concern about the regulation of the Chinese tech sector. Among those, Mihir Vora, the high-profile Chief Investment Officer of Indian insurance giant Max Life Insurance.

“Help always arrives from unexpected sources. India VC flows at the highest ever, exceeding China for the first time… VCs are leading the game as China’s crackdown on big tech scared investors – advantage India,” he wrote on Twitter.

“India should be a default option in a China + 1 sourcing strategy by global corporations – it is for us to seize this once-in-a-generation chance with the right policies.”

Vora shared a chart showing VC funding for Indian companies reached almost $8 billion in July.

India flows “interesting”: Goldman Sachs

Stephanie Hu, Global Co-Head of Growth Equities at Goldman Sachs said investors are turning to India after the sharp de-rating of Chinese tech reinforced the need for diversification.

“I think fundamentally people still believe China is a very important market, it’s large it’s growing and that this is more adjustment targeting internally to quote unquote fix the economy to make it more long term sustainable,” she said in a briefing

“But that being said, interestingly if you observe the public markets, while all that volatility was coming through in China, in the last two weeks in India we actually saw that there were a number of early stage tech deals starting to get very strong funding. Also some of the debuts of the publicly traded tech companies were doing very well.

“So one would try to put two and two together and say it’s going from China to India… It makes people think more about diversification of geographies and diversification of sectors and industries.”

IPOs thrive

Almost $9 billion has been raised in Indian IPO’s so far this year. For perspective, that’s more than the combined total for IPOs in 2018, 2019 and 2020.

The IPO frenzy has been led by Indian tech giant Zomato. The delivery company’s IPO attracted more than $45 billion in bids and was oversubscribed 35 times. It shares surged as much as 80% during its market debut on the NSE on Friday, July 23.

On India’s other exchange, the S&P BSE Tech Index is up 65% in the past 12 months.