Made-in-India social media platform ShareChat is reportedly aiming at raising $200 million from Chinese technology giant Tencent via optionally convertible debentures. In view of the strict Foreign Direct Investment norms put by the Government of India last year after the Galwan Valley face-off between India and China, it is possible that the funding will be routed via a Europe-based entity. According to the guidelines put in place in 2020, FDI from countries that share a land border with India will need prior approval from the central government.
Local data storage and processing may be at risk in future
Though the investment is expected to be done using optionally convertible debentures that are debt instruments, there are clauses that allow such investment to be converted to equity after a certain period of time. In that case, the management control of ShareChat may shift from the Indian management to the Chinese tech giant. According to Economic Times, experts believe there is a possible risk related to local data sharing and processing in case Tencent converts the convertible debentures to equity shares in ShareChat.
Notable investments in ShareChat
In August 2019, ShareChat managed to raise $100 million from microblogging giant Twitter. In September 2020, it raised another $40 million from existing investors, including Twitter, Lightspeed Venture Partners, and others. Some other notable names in the list of investors include TrustBridge Partners, Shunwei Capital, and Elevation Capital.
Last year, ShareChat had appointed Gaurav Mishra, former product leader at Uber. The company also announced that it was planning to open ShareChat Labs, a Centre of Excellence in Palo Alto, California. In November 2020, there were reports that Google was in talks with ShareChat for acquisition at a potential valuation of over $1 billion.
Tiktok ban had helped apps like ShareChat to flourish
When TikTok was banned in June last year, it left a huge void in India’s short-video market. Several apps, including ShareChat’s Moj, took advantage of the situation and captured a significant share in the Indian market. So far, the app has crossed 100 million downloads on the Google Play store.
As the government has been firm about not allowing Chinese apps to make a comeback in the Indian market, several apps, including TikTok, Helo, WeChat and Alibaba’s UC Browser, were permanently banned in January 2021 after the parent companies of these apps failed to give a satisfactory answer to Indian government’s notice.
Tencent’s penetration in India
Notably, along with over 200 other apps that were of Chinese origin, the Central Government had also banned PubG, in which Tencent owned 10% share. Also, another social media app WeChat was permanently banned by the Indian government in January. However, several companies in India have Tencent as one of the investors, including Flipkart, Ola, Swiggy, Hike, Ibibo, Policy Bazar, Udaan, MX Player, Khatabook, PocketFM, Practo, BYJU’S and others. Globally, Tencent has invested in over 800 companies.