BENGALURU: About half a dozen Chinese investors, including Tencent and Cheetah Mobile, were camped in India last month, promising respite to a drought-hit funding ecosystem. But for domestic internet companies, it’s probably too early to celebrate.

Chinese conglomerate Fosun Group; Shunwei Capital Partners, the venture capital firm led by smartphone maker Xiaomi’s founder Lei Jun; mobile internet company Cheetah Mobile; internet giant Baidu and investment firm Tencent recently held discussions with more than a dozen founders of mid-stage companies in India and several venture capital firms, according to several people aware of the meetings.

But in contrast to the earlier blind aggression of predominantly US hedge funds in backing Indian startups, Chinese investors are undertaking a much closer scrutiny, asking difficult questions on business strategy, scalability and growth trajectories, sources said. Chinese firms are dragging potential funding into companies until they can see the kind of sales growth that can fuel their ambitious expectations, they said. “We are looking for a company which can scale not 2-3 times but 20-30 times.

Then there is value,” said a representative for a China-based investment company that recently held discussions with Indian internet firms, declining to be identified because talks were still underway.

None of the Chinese investors mentioned here replied to emails or messages left on their websites by ET. Venture capital investments fell drastically by over 80% in the first quarter of 2016 to $337 million (about Rs 2,200 crore) from $1.79 billion in the corresponding year-ago period, as mega financing rounds disappeared and deal sizes shrunk. Large internet companies such as Flipkart and Snapdeal, too, are struggling to raise money at existing valuations.

Correction in the number and size of transactions has been the sharpest at late-growth stage (by 75-80%), where the Chinese investors are expected to fill in. Last year, Tencent led a series-C investment of $90 million in healthcare app Practo.

With China bracing for depression and several large global markets in a slump, India represents a big opportunity for investors, with its steady economic growth. Ecommerce sales in India are expected to grow to $55 billion in 2018 from $14 billion in 2015, according to researcher eMarketer.

Even so, Chinese investors are treading with extreme caution, having witnessed giants such as US hedge fund Tiger Global Management drop pace in India in part because of the patchy business fundamentals of domestic internet companies. Industry experts said while Chinese investors—who display a fondness for growth and scale of opportunity-—were keen to make substantial investments in capital-parched internet sectors in India such as food delivery and logistics, they were likely take at least a year to study markets.

“I think it will take another three months to see any serious investments from them. They are just doing a recce at the moment,” said an entrepreneur who has held fundraising discussions with one of the Chinese investors mentioned earlier. India’s decision last month to allow 100% foreign investment in electronic marketplaces is also likely to prove a deterrent to online retail spaces seeking to raise capital.

While Chinese firms have invested in Indian companies—Foxconn and Alibaba Group have put money in Snapdeal; cab-booking company Ola is a partner in Didi Kuaidi’s global alliance targeting Uber; and Alipay has invested in Paytm—they can now explore options to begin operations directly in the country. Alibaba Group has already expressed intentions to enter India’s ecommerce market this year.