BENGALURU (BLOOMBERG) – China’s crackdown on its technology industry means global investors seeking emerging-markets exposure will turn their attention to India, said Sumant Mandal, a managing partner at US venture investor March Capital Partners.
Investors are now putting more weight on “government risk” as they assess Chinese technology companies, Mr Mandal said in a video interview. Indian start-ups in areas such as Internet and cloud software offer strong growth prospects but without a similar risk profile, said Mr Mandal, co-founder of the California-based firm.
Chinese regulators are reining in unruly Internet companies in a campaign that spans everything from gaming to “money worship,” raising questions about their growth and earnings prospects. While India’s Internet industry is trailing far behind that of China in size, it’s recently produced new billion-dollar start-ups and initial public offerings at an intensifying pace.
“China’s market is of a size and scale that’s unmatched,” Mr Mandal said. “But the risk-reward structure around China has changed” and investors from the United States, Europe, Asia and the Middle East are now looking to balance their portfolios by re-routing investments to its neighbor, he said.
March Capital has a long track record of backing Indian start-ups and it plans to increase such investments, he said. The coronavirus has changed consumer behavior in India, a boon for companies handling e-commerce and digital transactions. The firm has more than US$1 billion (S$1.35 billion) in assets under management, including a US$450 million fund which closed early this year.
Last month, March Capital had two exits in India that represented nearly US$6 billion in combined deal value: Online payments service BillDesk was acquired for US$4.7 billion, just days after CarTrade Tech had its IPO.
Mr Mandal leads March’s investments in areas such as blockchain, network infrastructure and software as a service, or SaaS. More than two dozen India-born SaaS start-ups have moved to the US to successfully win global customers and garner hundreds of millions of dollars in revenue, he said.
“Now there’s more of a belief system around India,” he said. “The size of start-ups like Flipkart, Byju’s and BillDesk changes everything.”