Whether you view it as a crackdown or restructuring, Chinese technology companies have been in the limelight for all the wrong reasons these past several months. Close to a year since Alibaba Group founder Jack Ma made his infamous speech at The Bund Summit in Shanghai, where he accused banks in China of having a “pawnshop mentality”, the technology sector in China has been consistently scrutinized by the country’s financial regulators.
Questionable working conditions, personal data breaches and monopolistic behaviour are just the tip of the iceberg when it comes to the violations that China’s major technology companies have been accused of over the course of the past year. Meituan, China’s popular food delivery platform giant earlier this month was fined 3.4 billion yuan (US$534 million) by China’s State Administration for Market Regulation for forcing restaurants to work exclusively within the company’s platform that blocks them from offering takeout delivery on other platforms.
Despite the proactiveness of Chinese antitrust laws, these technology companies, nevertheless, have sufficient financial buffers to ride out a bout of dampened revenue growth and reduced profit margins. “The regulations have had a negative credit effect, with penalties imposed on companies for M&A [merger and acquisition] and business practices that the regulator said increased market concentration and stifled competition. Although the penalties have not weakened rated companies’ financial strength, they will limit their ability to increase their scale and business scope through M&A,” explains Lina Choi, senior vice-president at Moody’s Investors Service.
While Chinese technology companies continue to face their ongoing challenges and eventually learn to pivot to fit China’s “common prosperity” policy goal, Indian technology companies in contrast have had a stellar 2021.
Since the start of the year, there has been a string of Indian technology IPO listings, with food delivery platform Zomato and online auto dealer portal CarTrade some of the notable ones. In the case of Zomato, the company was able to raise around US$1.3 billion from investors with its share price closing 66% up on its first day of trading.
Overall, the Indian equity market has been on a tear throughout 2021 with the Nifty 50 market index up 30.86% year to date October 2021. “New-age and tech companies that are coming up are driving equity market activity in India,” shares a banker familiar with India’s equity capital markets. “In the last 18 months, around 80% of IPOs that have come out of India have given investors significant returns, on average around 35% year to date.”
Momentum in India’s technology sector doesn’t seem to be slowing down in the coming quarters with the much-anticipated listings of digital payments platform Paytm and online insurance platform PolicyBazaar on the horizon. India’s online retail market is on course to be the third-largest globally behind China and the United States, with annual gross merchandise value, according to consulting firm RedSeer, expected to hit US$55 billion in 2021 and US$350 billion by 2030.
