Singapore-based Tiga Investment Pte Ltd will acquire Tencent’s shares for over $150 million, the people cited above said on the condition of anonymity. Mint could not ascertain Tencent’s exact holding in Dream11 or the amount it plans to sell.
“The transaction is being undertaken to comply with PN-3 filing,” one of the people cited above said, referring to a government notification restricting investments from the northern neighbour.
Investments from China came under a harsh glare after border tensions flared up in Ladakh in 2020. Press Note-3 (PN-3) issued in April 2020 formalized the scrutiny, requiring government approval for investments from neighbouring countries.
Also read | Every rejection taught us how to build our pitch: Dream11’s Harsh Jain
Although the latest Economic Survey appeared to make a pitch for Chinese foreign direct investment in select segments, government officials have since then clarified that there would be no letdown in scrutiny of Chinese FDI.
Tencent and Tiga did not respond to requests for comment; Dream11 said it had no comment.
Tiga’s investment plan has secured approval from the Competition Commission of India (CCI) through its green channel. “Since the Parties and their respective group entities and affiliates do not have any (a) horizontal overlaps; or (b) existing or potential vertical linkages; or (c) existing or potential complementary business activities in India, the Proposed Transaction is unlikely to cause any appreciable adverse effect on competition in India,” the website said.
In recent times, the govt has been more open to grant approvals for Chinese FDI in some sectors, such as manufacturing.
-Sudip Mahapatra
News website VCCircle first reported Tiga’s interest in Dream11 earlier this week.
“Formally, the restrictions on Chinese investments under Press Note 3 remain changed,” said Sudip Mahapatra, partner, S&R Associates. “However, in recent times, the government has been more open to grant approvals for Chinese FDI in some sectors, such as manufacturing. In overall economic interest, there is a growing case to limit the restrictions on Chinese investments to a few strategic sectors, ” Mahapatra added.
Tencent first acquired a sizeable stake in Dream 11 in 2018, when the gaming company was valued at $750 million, but has sold shares several times since then. Tencent had invested in Dream11 as part of its strategy to invest in gaming companies across the globe. For instance, it owns a significant stake in Fortnite developer Epic Games and acquired Super Cell, the developer of Clash of Clans, for over $10.9 billion in 2016.
Also read | Dream11 parent prepares war chest as it pivots M&A strategy
Since 2020, however, Indian startups have largely shied away from taking equity investments from Chinese firms. Tencent had also changed its strategy to invest in India through debt, Financial Times reported in September 2021.
In recent transactions, Tencent bought ShareChat’s optionally convertible debentures when it raised a $49 million debt financing round. In 2021, the Chinese conglomerate also invested in Cars24’s parallel debt round, when it raised $320 million in equity from other investors at a valuation of $1.84 billion, according to VCCEdge.
Some other companies where Tencent holds a stake include digital ledger for small business owners Khatabook, neo bank Niyo, medical service aggregator Practo Technologies and food delivery business Swiggy, according to VCCEdge.
In a March 2021 interview with the Economic Times, Dream11 co-founder Harsha Jain said Tencent’s stake stood at 10.9%, and that the company would not raise further capital from Chinese firms.
And read | China’s Tencent in talks to join ShareChat’s fundraising round
Since then, Tencent has seen its stake get diluted, most significantly in Dream11’s $840 million fund-raise at a valuation of $8 billion. Other Chinese investors have also had to sell their stakes. Alibaba Holdings sold its stake in Paytm in 2023.
Meanwhile, Dream11 has also returned significant capital for early investors. In an April 2021 post, Kalaari Capital founder Vani Kola said that Dream11 had returned a $206 million to Kalaari LPs ‘with many fold upsides still locked into the company”. Multiples PE has also made over 10X returns on its Dream11 investment.
