Covid-19 Lockdown: Startup Lobby Seeks Exemption From Curbs On China Investments, Rs 25,000-Crore Fund
Startups seek exemption from curbs on Chinese investments, a bigger fund to tide over Covid-19 disruption.
A startup lobby including MakeMyTrip founder Deep Kalra has sought exemption from India’s clampdown against Chinese investments and a Rs 25,000-crore fund to help them tide over the coronavirus pandemic that has stalled the economy.
The Startup Association of India said the government’s amendment requiring prior approval for any investment from neighbouring nations such as China should exclude startups, according to its letter to the ministries of commerce and trade. BloomebrgQuint has reviewed a copy.
The pandemic has significantly hurt the future business prospects of Indian startups which were already reeling under financial pressure, said the group with 2,000 members, including Sanjeev Bikhchandani of InfoEdge, which owns a stake in Zomato.
Chinese investors, the association said, have invested more than $8 billion in the Indian startups. Large venture capital funds from China have raised money from the U.S. and other global investors exclusively for investments in startups in emerging markets, bulk of it to be deployed in India, the letter said.
Indian unicorns including Zomato, Delhivery, BigBasket, Paytm, Policy Bazar, Paytm and others have raised billions of dollars from Chinese investors including Alibaba Group, Fosun Group and Tencent Holdings in the past few years.
The association’s letter was marked to Piyush Goyal, minister of commerce and industry; and Guruprasad Mohapatra, secretary in the Department for Promotion of Industry and Internal Trade.
The Delhi-based lobby said the changes in the foreign direct investment policy should not be applicable for startups raising money from existing investors. And to allow continuity in access to capital, the amendment should exclude investments that are purely financial without any rights or control in any Indian startup.
If Indian startups are not bailed out on time, it is likely to cause significant job losses in the country, the association said. According to industry lobby Nasscom, startups employed between 390,000 and 430,000 people in 2019 and this could go up to 12.5 lakh direct jobs by 2025.
Bigger Fund
The association wrote that startups lack the ability to survive the downturn and are running out of cash, urging the government to set up a ‘Startup India Fund. “Extraordinary circumstances require extraordinary measures.”
For that it suggested the government should merge the existing Rs 10,000 crore fund-of-funds, administered by the Small Industries Development Board of India, and provide an additional support of Rs 15,000 crore.
“As you are aware, out of the corpus of Rs 10,000 crore with Sidbi, only Rs 3,798 crore has been committed; of which, just Rs 1,025 crore has been disbursed till June 2019. The proposed fund would then constitute a total corpus of over Rs 25,000 crore.”