Indian startups to miss Chinese expertise more than cash: SoftBank exec

Chinese capital comes with a lot of expertise on business, and Indian startups will be missing this input the most following the clampdown on investments from China, a top executive of Japanese investment major SoftBank Group said on Wednesday.

Pegging the financial setback as a result of the Indian government's moves at $10-15 billion, Rajeev Misra, a board director of the group and chief executive of SoftBank Investment Advisers, said the capital can be replaced from others in a market flooded with liquidity.

India has banned over 200 Chinese apps and also put severe restrictions on Chinese investments into the country following border clashes in eastern Ladakh.

"Chinese capital was not just capital. It also came with a lot of expertise," Misra said, speaking at the Global Business Summit.

Citing the example of its China-based investee company Alibaba's investment in Paytm, he said this was a strategic and not a financial investment where the domestic payments major gained in know-how.

Similarly, companies across various fledgling sectors like food delivery and ride hailing have benefited courtesy the knowledge they gained from their Chinese investors, he said.

"A few billion dollars... $10-15 billion of financial capital will be replaced, it is the technical knowledge that a ride sharing co can get from a Chinese ride sharing (firm) which will be missed. Right or wrong is not for you and me to discuss," he said.

Misra also said establishing technological supremacy is the next frontier of strength which will have a bearing on GDP growth because of the importance of areas like genome mapping, medical technology and chip design on economic activity.

"The next frontier in the world for any show of strength or a form of cold war will be fought in the battleground of technological supremacy for the next 10 years... Countries and nations will want to become self-sufficient in technology, and that is where the power will come from," he said.

Misra declined to specifically answer a question on whether SoftBank is looking to invest in Reliance Retail or taking over Chinese app TikTok's India operations, but limited himself to saying that it is sitting with $50 billion of firepower and is "hungry" to plough that money.

He said apart from hospitality-focused Oyo, all its other bets in India are enjoying tailwinds amid the pandemic.

Oyo has sufficient capital to last it for over two years and has undertaken a slew of measures recently to cut its operational expenses down to $30 million a month from $100 million levels, he said.

It is clocking revenues of $25-30 million a month and is achieving break-even, he said, adding that the shutdown of the business in the pandemic has resulted in Oyo not being able to grow and report profits.

"They've taken the necessary steps to weather the storm," he added.

Misra further said venture capital funds are at a disadvantage because of the easy liquidity policies the world over, which are helping companies command much higher valuations in the public markets.

SoftBank has an ecosystem strategy to take care of the concerns arising from such a situation where founders of companies are enjoying more leverage, he added.