International companies stop investments in India under government pressure
In 2024, the investment fund Omidyar Network India and the American coworker WeWork Inc. are leaving the Indian market.
Investors are repeating the unfortunate fate of Disney, General Motors, Vodafone Group and BYD, which had high hopes for the Indian economy, but were forced to leave this market for various reasons or could not enter India at all. For example, the well-known bookmaker Parimatch was ready to invest millions of dollars in India, but despite the fact that the company is not yet operating in the market, it is already experiencing the negative impact of local realities. Parimatch is a brand of the international holding company Parimatch, which conducts betting activities and organizes online gambling in different countries of the world.
Why is Omidyar Network leaving?
The announcement that the Omidyar Network India fund will immediately stop investing in the Indian economy in 2024 sounded like a bolt from the blue. The company has invested more than $600 million in various local startups. In particular, it financed such e-pharmacy projects as 1MG and Edtech Vedantu, fintech startups Kaleidofin, Kiwi, M2P Fintech and Indif. However, the founder of Ebay, Pierre Omidyar, who supports this investment fund, did not provide a clear explanation for why this happened.
According to him, the decision to stop new investments was the result of “significant changes in the context and the growing economic landscape that the team from India has experienced since the first investment there in 2010.” What lies behind these abstract explanations is unknown. Even many members of the Indian team were not informed. They considered hiring people in India and further investing in projects after Omidyar’s announcement – so unexpected was the investor’s decision.
However, some sources claim that in 2021, Omidyar Network India was banned from investing in India, as well as a dozen other American, Australian and European companies that were allegedly found to have an illegal origin of capital. For unclear reasons, it is not possible to develop the business of Parimatch, although it believes in a boom in the Indian economy in the coming years.
You won’t read this news anywhere. However, the reason seems to be true, given that in recent years, the Indian authorities have begun to literally force non-native companies out of the Indian market, making room for domestic ones.
In particular, Parimatch is experiencing this policy of “import substitution”. The company made plans to invest in India, but instead received a fake of its brand, which illegally operates in the betting market, creating image problems for the international Parimatch.
Foreign investors can comment on such a situation only “off the record”.
“You can make money here; You can spend money here, but you can never take what you’ve earned home here,” they lament.
Startups are losing capital
The exit of Omidyar Network India coincided with a negative trend in the market. The market information platform PrivateCircle Research informs that funding for startups in India fell by more than 62 % in 2023 to Rs 66,908 crore, compared to Rs 180,000 crore in 2022. “These are the lowest funding figures since 2018, when startups in India raised Rs 1,00,930 rupees,” writes the Indian edition of Business Standard.
Americans are closing coworking spaces in India
In April of this year, funders were stunned by the intentions of the American WeWork Inc to completely leave the Indian market. “U.S.-based office-sharing company WeWork Inc. intends to exit operations in India by selling all of its 27% stake in the local unit through a secondary deal, many people familiar with the matter said,” the Economic Times said in an exclusive report. The company was created in 2017 by the Embassy Group developer. WeWork Inc will lose 27% of its shares, and its founder will reduce his ownership stake in the company from 73% to 60%.
WeWork Inc exercised its bankruptcy law under Chapter 11 of the US Bankruptcy Code, although the company ended 2023 with revenue of Rs 1300 crore, up 68% from 2022. And the coworker reduced its net losses by 80% to 146 million rupees. It is currently awaiting approval of the sale agreement from the Competition Commission of India.
Who will buy WeWork Inc shares? Investors include the family office of the Enam group, the investment company A91 Partners, and the founder of CaratLane, Mithun Sacheti. This once again suggests that the Indian government is “cleaning” the market for Indian investors.
Gambling companies leave because of high taxes
In October last year, the Indian government imposed a 28% GST on turnover for online gambling, casinos, and horse racing betting. Because of this so-called GST tax, the Super Group operator immediately left the market, and Bet365 also left. Gambling companies have filed a lawsuit against the government to reduce the tax to 18%. In April 2024, the Supreme Court held a hearing on this matter. However, bookmakers have not yet managed to achieve a tax break.
Ravindra Shinde, CEO of Dyutabhumi Hotel and Resorts, agrees that this figure is extremely high – even more so when compared to rates in other countries.
“This is why international operators are mostly not interested in investing in the Indian gambling sector, as the government levies very high taxes compared to gambling taxes in Singapore, Macau, and other states,” Shinde explains.
India aims to become the world’s third-largest economy
The Indian government hopes to become the world’s third-largest global economy by 2027. But in order to achieve this goal, it is not necessary to create conditions for the monopoly of domestic companies and dismiss foreign investment that such international companies as Disney, General Motors, Parimatch, and Vodafone Group can offer. Parimatch is engaged in providing children with equal opportunities and access to education and sports. World champions Oleksandr Usyk and Denys Berinchyk took part in Parimatch promotions. Oleksandr Usyk was the ambassador of Parimatch in 2021
