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China's TH Capital spots big promise in Indian tech-driven models

2020-01-10

Chinese investment bank TH Capital is looking to foray into India to tap on sectors such as consumer, logistics, fintech and enterprise services, among others.

Guo Ruyi, managing partner, China TH Capital.


Established in 2012, the tech-driven investment behemoth claims to have facilitated fundraising for more than 110 startups, including over 30 unicorns, helping them garner as much as $17 billion from the primary market.

“We have a long-term perspective on the India market," said Ruyi Guo, managing partner at China TH Capital in an interview. The firm is betting big on India and considers it and other Southeast Asian countries as its parallel strategic market alongside China.

In 2019, TH Capital assisted Indian social networking and regional content platform ShareChat as its financial advisor and helped it raise a significant part of its $100-million Series D round from Chinese investors TrustBridge Partners, Shunwei Capital and Morningside Venture Capital. While the round was led by Twitter, other investors who pumped in the capital were Lightspeed Venture Partners, SAIF Capital, and India Quotient.

Opportunities in India can currently be categorised in diverse segments in the area of technology. The country has the potential to create “most dynamic market for the new economy companies and demands for consumer goods and services, contents, education and healthcare will emerge,” said Guo.

Currently, less than half of the 1.2 billion population have access to the internet that goes on to show “great potential for Internet penetration to grow.” The India strategy for TH Capital will be on the same lines as its home market. “We understand the investment thesis of global VCs/PEs in the emerging market….” Said Guo, adding the firm’s target are tech-driven models.


Edited excerpts:-


Currently, there are concerns over a slowdown in the Indian market and the next three-six months are absolutely critical. What makes you enter India at this stage?


We have a long-term perspective on the Indian market. First of all, India has the second-largest population, and the average age of the population is only 27 years old. This will eventually create the most dynamic market for the new economy companies and demands for consumer goods and services, contents, education and healthcare will emerge.

Secondly, only less than half of the population has access to the internet, this also shows the great potential for internet penetration to grow. Thirdly, with the infrastructures upgraded, sectors like transportation and logistics, and tech-driven innovations will definitely grow at a higher speed in the coming years.

Last but not least, the Digital India initiative has attracted more and more young entrepreneurs and talents into business innovation. So even if there is a short-term fluctuation on the market, we believe that there’s an unstoppable trend of great India new economy companies coming up.


What would be your India strategy? Which are the sectors that you are looking to target?


We basically cover all sectors back in China and have helped over 30 unicorns back in those sectors. We understand the investment thesis of global VCs/PEs in the emerging market. We will leverage all the know-how we have about the growth-to-late stage global investors, all the benchmark analysis we have done on the US-listed companies, all the growth stories of amazing business models emerged in China market in the past decade, and all the do’s and don’ts of the entrepreneurs, to help India founders build up solid business.

As for sectors, almost all tech-driven models are our targets, for example, social, e-commerce, content, education, supply chain, transportation and logistics, and enterprise services.


A slew of Chinese companies is already here. These include prominent names such as Tencent, Alibaba, Trip.com, among others. There is more to the list. Does that make you a late entrant here considering you could have facilitated the entry of a lot of players previously?


We are financial advisors, we link start-ups/founders to all the investors, the more investors in this market, the more we can do. As for all the Chinese strategic investors mentioned in the question, as well as the global and Chinese financial investors (Sequoia, Tiger, Hillhouse..., etc.), we have quite good connections with them, by discussing about their India strategies with them constantly, we can help our India clients identify the right investors to talk to, making their fundraising process a lot more efficient.

What is your view on the M&A market in India vis-à-vis that of China? What are the opportunities and challenges?

China has overseen a decade of active investments and M&As in different sectors, and the market is still vigorous nowadays. We believe that the Indian market will show a similar trend on the M&A market, especially because Indian entrepreneurs have the vision of doing business globally. With all the global strategic players in the market (Facebook, Google, Twitter, Amazon, Alibaba, Tencent, Xiaomi, ByteDance…), M&A activities could rise when local start-ups grow larger enough. We also see a trend of new-comers into the market, such as Meituan & Kuaishou. Challenges could be the integration of companies after the M&A, and the difficulties on corporate governance issues.


While you are in the investment banking space, you have also made some investments directly into companies, primarily startups? Do you plan to do that in India as well?


Yes, we have made some investments into startups in China, but direct investments are not our focus yet, both in China and other emerging markets. Our primary focus is the financial advisory service, we will dig deep into the market, help as many top-tier companies as possible to raise capital in a more efficient way so that they can grow rapidly and healthily. We will constantly review our strategies in this market, and if the timing and opportunities are right for us, we may make some investment as well.

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