Global private equity players and venture capital investors, including SoftBank, Warburg Pincus, Sequioa Capital, Carlyle Group and several others held a virtual meeting with union commerce minister Piyush Goyal last week to seek clarity on the revised foreign direct investment (FDI) rules around investments from entities or beneficiaries based in China.

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Sources privy to the developments told CNBC-TV18 that these private equity players and venture capital investors are concerned on whether the rules will apply even to funds that may have Chinese limited partners.

SoftBank in a statement said, "We don’t comment on confidential discussions held with relevant stakeholders, including the government." Sequoia said the company will not comment while other funds did not respond to queries till the time of publishing this story.

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Separately, the India Private Equity and Venture Capital Association (IVCA) has also reached out to government departments of Department of Promotion of Industry and Internal Trade (DPIIT), Niti Aayog as well as the union finance ministry to seek clarity on the issue.

IVCA has also put forth some recommendations such as exemption for Alternative Investment Funds (AIFs) registered with Sebi and the need for a ceiling on value of investments under which investments can be done without government approval.

On April 18, the central government revised FDI policy to direct any investment from any entity or beneficial owner in a country which shares land border with India only through the government route.

This left several open-ended questions on the venture capital and private equity funding flowing into India which may have a Chinese connection through an limited partner or any other beneficiary in the chain of capital.

Also read: New FDI rules to hit Indian unicorns, other startups running on Chinese capital

Karthik Reddy, vice-chairperson, IVCA, said it has reached out to DPIIT, union finance ministry and Niti Aayog for clarity, "We have sought clarity on whether pooled vehicles with Chinese capital will be impacted. IVCA has also asked if there can be a cap below which funding does not need to go through govt approval."

The government is expected to respond to the industry feedback soon.

The move by the government is expected to have a big impact on Chinese investments into Indian startups, especially at a time when startups have limited runways due to the COVID-19 crisis.

Chinese tech investors have put an estimated $4 billion into Indian start-ups, as per the February 2020 report by think tank Gateway House. The report also highlighted that 18 of India’s 30 unicorns are Chinese-funded. This includes the likes of Flipkart, Ola, Oyo, Byju’s, BigBasket, Zomato among others

First Published:May 8, 2020 5:23 PM IST