Mumbai: The China-based Shenzhen Stock Exchange is creating a platform which will facilitate access of Chinese capital for Indian fin tech companies and technology based startups. The Tech 2.0 platform which already exists for Chinese companies will now be extended for new generation of Indian tech companies—called as Cross-border Capital Services Platform.
The platform will be operated by Shenzhen Securities Information Co., Ltd, a wholly owned subsidiary of Shenzhen Stock Exchange. The Shenzhen Stock Exchange (SZSE) is the largest in China by trading volume, with average daily turnover of about $50 billion in 2016.
Officials of the exchange, including its Chairman Wu Lijun were in India last week for a roadshow to showcase Indian companies to Chinese investors. While, speaking to Mint exclusively Huiqi Pei, head of international department, Shenzhen Stock Exchange said that India is their first market for ‘such’ cross border funding.
“China and India are often depicted as the “world factory” and “world office”, both of which are indispensable segments in global value chains. Economic cooperation of the two most populous countries will form the most competitive production base and most attractive consumption markets. Yet the mutual investment between the two sides is by now not as active as it should have been,” said Pei.
Currently, China is ranked at number 18 in terms of investment in India through the Foreign Direct Investment and only seven, Chinese institutional investors are registered as foreign portfolio investors (FPIs).
“There is much room for improvement and we think it is quite promising to start with India and tap the great potential between these two economies. With the good consumption potential and bright market prospects drawn from its vast population, India will attract more and more investment from Chinese investors and companies,” said Pei.
In the roadshow over 40 Chinese investors participated to look for potential Indian companies.
The Tech 2.0 platform will facilitate information sharing, and connecting Indian tech companies to connect with private equity and venture capital investors from China.
“Lots of Shenzhen-listed companies as well as VC and PE are focusing on cross-border investment and Merger and Acquisitions as China’s economy is increasingly merged with global value chain. It is logical for the exchange to provide a trusted and public-welfare-based platform to eliminate information asymmetry and facilitate cross border capital formation,” said Pei.
While the first round of investments will flow from China to Indian companies, the exchange envisages investment flow from India to China.
“In the future, the platform will combine with the experience of the Shenzhen market construction, to further standardize the operating mechanism, optimize technical capabilities, strengthen risk prevention, and create a credible and authoritative cross-border capital services platform. It will help investors from the two countries to share in fruitful results of high-tech and innovative companies’ development,” said Pei.
In India platforms that allow potential investors and companies to come together exist but they are outside the exchange and regulatory purview such as Grex Alternative Investments Market, Let’sVenture, Equity Crest.
The Securities and Exchange Board of India (Sebi) in 2014 had proposed an exchange platform to allow for such meeting of investors with tech companies. The platform did not take off due to lack of takers and stricter regulatory requirements.
Shenzhen is not ruling out collaborating with an Indian exchange to facilitate further development of the platform.
“We expect more institutions from both China and India participate in the platform, sharing information and resource, building cooperation network, expanding platform penetration and influence, promoting more capital integration. Indian exchanges are also within this range,” said Pei.