Bengaluru: Tencent Holdings Ltd is fast becoming one of the most influential and closely-watched investors in India’s internet business, as the Chinese giant looks to diversify outside its home market and match arch-rival Alibaba Group Holding Ltd in building a presence in India.

So far, Tencent has invested $850-900 million in Indian start-ups, including $700 million in Flipkart Ltd. Tencent first invested in Indian start-ups in August 2015, when it led a $90 million round in digital health platform Practo Technologies Pvt. Ltd. Its other investment is messaging app Hike Ltd. The company is also in advanced talks to invest $400-500 million in Ola (ANI Technologies Pvt. Ltd), one person familiar with the matter said. The news was first reported by The Economic Times newspaper.

If the deal with Ola goes through, Tencent will have a significant presence in four large areas: e-commerce, digital healthcare, cab ordering and messaging. It’s looking to enter more.

Tencent has held talks to invest in online insurance retailer Policybazaar (EtechAces Marketing and Consulting Pvt. Ltd), two other people said on condition of anonymity. Those talks haven’t yet led to a deal, they added.

Tencent has hired Tejeshwi Sharma from Sequoia Capital India to help scout for new investments in India, the two people added. Chris Huskey, a senior Tencent executive based out of Hong Kong, tracks the company’s India investments closely, they said.

Tencent did not respond to an email seeking comment.

It set up shop in India in 2014 and planned to grow its messaging app WeChat. That bet did not pay off as Facebook-owned messaging app WhatsApp quickly built a monopoly in messaging. In 2016, Tencent shifted its focus to investing in Indian internet start-ups.

Valued at more than $400 billion, Tencent is one of two giant Chinese internet companies (the other is Alibaba) which are in a rush to establish a global presence. In the year ended December 2016, Tencent earned a net profit of $6 billion on revenues of $22 billion, according to its annual report. Its platform is unlike anything people in India or the US have seen: Tencent generates a majority of its business from two of its messaging apps, WeChat and QQ, which are all-in-one platforms for gaming, shopping, social networking, even payments.

For both Tencent and Alibaba, India is one of the top markets outside China. As the Chinese internet market matures, Tencent and Alibaba need to enter other markets to keep up their growth rates and valuations. Given that India is widely seen as the last big unconquered internet market in the world, Tencent plans to plough billions of dollars into India over the next three years, the two people familiar with the matter said. While India’s internet market is a fraction of China’s, it offers a large pool of users, a key metric in the internet business.

“Tencent believes that India is behind China by 5-10 years. It thinks that India will play out in a somewhat similar way to China, so it is placing bets early. It will start getting operationally involved in some of the companies within the next two years. Tencent will back its portfolio companies that see traction, and also wants to increase its stake in them," one of the two people cited above said.

Tencent and Alibaba, which has a large stake in payments firm Paytm, are battling each other for dominance of China’s internet market.

The Tencent-Alibaba rivalry recalls that between Amazon.com Inc. and eBay Inc., which in the 2000s were fighting each other in their home and global markets.

Tencent has close links with two other investors in India, Naspers Ltd and SoftBank Group Corp. Naspers, which owns large stakes in Flipkart, Swiggy and MakeMyTrip, is the biggest shareholder in Tencent and played a key role in persuading Tencent to invest in Flipkart. In China and some other markets, Tencent has co-invested with SoftBank, which is the largest shareholder in Alibaba. The two combinations of Tencent-Naspers and Alibaba-SoftBank are likely to play a key, intertwined role in determining the shape of India’s internet business.

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