NEW DELHI (BLOOMBERG) - India has banned 54 apps it says are of Chinese origin, including Sea's marquee game Free Fire, citing security concerns, sources have said, in the latest instance of tensions between the two neighbours locked in a protracted border dispute.
Sea's stock sank as much as 19 per cent in New York on Monday (Feb 14), the steepest decline on record.
The apps banned by the South Asian nation's Ministry of Electronics and Information Technology include those belonging to large Chinese tech firms such as Tencent, Alibaba and NetEase, and are rebranded versions of apps already banned by India in 2020, the sources said on condition of anonymity.
Sea, founded in Singapore by Chinese-born founders who became Singapore citizens, has been focusing on building a gaming and e-commerce business globally, with early backing from Tencent, the largest shareholder of the company.
Sea did not immediately respond to requests for comment on the ban on the game Free Fire - Illuminate.
Free Fire, a battle royale shooter, is among the world's most popular mobile games, with more than a billion downloads on Google Play. The title has underpinned the phenomenal growth of Sea, South-east Asia's most valuable company, and its expansion into markets from Brazil to India.
Free Fire India might account for less than 10 per cent of Sea's gaming revenues, JPMorgan analyst Ranjan Sharma said in a report, slashing his share price target by about 40 per cent to US$250. The potential ban of Free Fire could further increase nervousness around Sea's gaming franchise, he said.
The game was the highest-grossing mobile game in India in the third quarter of last year, said industry tracker App Annie.
While a surprise, the ban should not impact the company heavily, given the Asian country accounted for just under 3 per cent of Sea's overall mobile-gaming net sales last year, Bloomberg Intelligence wrote, citing Sensor Tower estimates.
South Korea's Krafton managed to grow its worldwide mobile gaming sales last year even though India banned its flagship PUBG game in 2020; the company launched a new game to get around the prohibition on Chinese-made apps.
While Tencent is Sea's largest shareholder, it has adopted much the same hands-off approach it takes with other investees in China. In January, the WeChat operator revealed it was cutting its stake in Sea to 18.7 per cent from 21.3 per cent, while taking its voting rights eventually to under 10 per cent.
A spokesman for India's Home Affairs Ministry did not immediately comment on the matter. A Ministry of Electronics and Information Technology spokesman declined to comment on the issue.
The latest move comes as a long-running dispute between the two nuclear-armed nations remains unresolved, after boiling over in a bloody 2020 skirmish that left soldiers from both sides dead, and drew tougher laws in India for investments from China, including the original app ban. Other Chinese tech companies listed in the United States also fell, with the Nasdaq Golden Dragon China Index declining as much as 1.9 per cent on Monday.
India and China share an unmarked 3,488km long border along the Himalayas, where thousands of troops, tanks and artillery guns from both countries have been massed. Tensions remain between the two countries remain, with India's army chief citing the risk of Chinese aggression as recently as last month.