Last week, China’s largest online company made its first investment in India in Practo, a Bengaluru start-up that digitises records for doctors and patients. The same day, Horizons Ventures, owned by Li Ka-Shing, Hong Kong’s richest man, bought a small stake in Ezetap, a Bengaluru-based payment technology start-up that helps small shops accept cards from consumers to buy goods.
The investments may be small, but they show the growing interest in Indian start-ups among Chinese companies, joining others like Alibaba Group and Hillhouse Capital.
“Most of the Chinese investments have been in consumer internet companies and in the mobile space. From a Chinese perspective, they have grown from desktop-first to mobile-first in the past three to four years,” said Karan Mohla, executive director and head of digital consumer investments at IDG Ventures India.
“India is where China was three years ago. They know which models work and where to put growth capital,” he added.
India is among the world’s largest “mobile first” markets, where mobile phones are the first computing device for millions of users. India is expected to add over 35 million smartphone subscribers a year to its 160 million user base over the next three years, according to Vserv, a platform for mobile marketing and commerce.
In contrast, China has 553 million smartphone users with growth slowing in the country. HSBC in July predicted that India’s smartphone growth till 2019 would be 26 per cent per annum, while China would see 5 per cent annual growth during the same period.
“Any Indian company that has investments from Chinese companies will find them hugely beneficial. We are skipping the desktop revolution and they have seen mobile growth,” said Mohla.
In June, Ant Financial, an online payment platform that dominates the Chinese market and is owned by the Alibaba Group, invested in the company owning Paytm, India’s largest mobile payment firm.
Xiaomi, which began manufacturing phones in India in partnership with Foxconn, plans to invest in Indian startups as it sees more smartphone buyers in the country.
Hillhouse Capital Group, an investment management firm owned by Chinese national Zhang Lei, has investments in CarDekho, the country’s largest car trading portal.
A Horizons Ventures spokesperson declined to comment stating that it did not comment on companies it had investments in. An Alibaba spokesperson declined to comment citing the company’s silent period.
Horizons Ventures made a financial investment in Ezetap, said Sanjay Swamy, co-founder and chairman of the Bengaluru firm. “They have seen the mobile internet growth in India. So the Chinese investors are thinking, we have done it in China, we should be betting on India as the mobile internet growth is what it was in China a few years ago,” Swamy said.
Chinese firms are also partnering local firms to explore the India opportunity, a country with users in multiple languages. “Strategically, it is easier to partner a local company,” said Swamy.