Info Edge founder and vice chairman Sanjeev Bikhchandani has called out the overt influence of foreign funds in the Indian startup landscape, likening it to the days of the East India Company. “Basically institutionalised transfer of wealth away from India while living off the Indian market and Indian labour somewhat like the days of the Company rule,” the founder of many internet companies like Naukri.com said in a series of tweets last week.
Shades of the East India Company type of situation here – Indian market, Indian customers, Indian developers, Indian workforce. However 100% foreign ownership, foreign investors. IP and data transferred overseas. Transfer pricing issues foggy. https://t.co/gANDVZOceS
— Sanjeev Bikhchandani (@sbikh) December 4, 2020
We reached out to Sanjeev Bikhchandani for comments. We will update this article with his responses.
Bikhchandani was drawing attention to the fact that many domestic startups now have foreign holding companies., wherein the founders, employees and investors in the startup hold shares in the overseas company. This has two major effects, one is that the overseas entity does not fall under the jurisdiction of Indian tax authorities or regulators and the second is a capture of intellectual-property (IP), he told Press Trust of India in an interview.
“If this happens on a massive scale you end up with a situation where the company, the investors, the value capture, the IP and the data are all domiciled overseas with little accountability to Indian regulators whereas the customers, the workforce, the development of IP and the capture of data are all in India…You have an institutionalized mechanism that effectively transfers wealth out of India on a very large scale…The act of value capture though all shareholding IP and data being domiciled overseas So you have a system that is not entirely dissimilar to the East India company days,” Sanjeev Bikhchandani to PTI
In his estimate at least 1,000 startups have ‘flipped’ from India through these structures over the last few years, which could have resulted in a
“You want access to the Indian market and customer however you don’t want the Indian government, regulators or tax authorities. The point is that it is a package deal. If you want one the other comes along with it. If there are some rules that you feel should be changed you should be in a conversation with the government rather than doing this,” Sanjeev Bikhchandani to PTI
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