From PhonePe, Razorpay to Groww and Zepto, many Indian start-ups have moved or initiated to shift their domicile from other countries to India, as they prepare for a public listing here. Called 'Reverse flipping', experts attribute this shift to multiple factors including the country's evolving policy and regulatory environment.
In December last year, fintech unicorn Razorpay said it is shifting domicile from the US to India and that it aims to go public by 2026. According to sources, shifting is in process and that it will take some more time for the company to complete it.
Earlier this year, quick commerce firm Zepto completed its reverse merger from Singapore to India. Zepto co-founder and CEO Aadit Palicha had said in January that "Along with other top Indian start-ups, this is a historic milestone for the Indian start-up ecosystem and an inflection point that represents long-term confidence in the liquidity and depth of Indian capital markets." The start-up is said to launch its IPO by this year.
Ashutosh Kumar Jha, General Partner at Expert Dojo, a US-based venture capital and growth accelerator firm, told TNIE that this reverse flipping trend is driven by multiple factors, making India a more attractive headquarters for high-growth start-ups.
"One of the primary reasons behind this shift is India’s evolving policy and regulatory environment. The government has introduced several reforms to strengthen the start-up ecosystem, such as removing the Angel Tax, easing foreign direct investment (FDI) norms, and establishing the International Financial Services Centre (IFSC) in GIFT City," he said.
According to him, these changes provide start-ups with a more seamless way to access global capital without requiring an offshore entity. Also, the country's capital markets have matured significantly, with successful IPOs of start-ups like Zomato, Nykaa and Mamaearth.
Another key factor in this trend is the stark contrast in requirements for listing on exchanges in the US versus India. "Indian companies often need to generate significantly higher revenues to qualify for listing on US stock exchanges, making it a far more challenging and expensive endeavour. This is in contrast to India, where the regulatory environment has become more start-up-friendly, and the revenue thresholds for IPO eligibility are more accessible. As a result, many start-ups are finding it easier and more cost-effective to list in India, which further boosts the appeal of staying or returning to India as their base of operations," he explained.
While the process of reverse flipping involves legal, regulatory, and financial restructuring, with costs ranging from $500K to $2M depending on complexity, the long-term benefits outweigh the expenses. "Access to domestic capital, improved tax efficiency, and regulatory ease make this a strategic move rather than a financial burden," Ashutosh Kumar Jha said.
In 2022, PhonePe moved its domicile to India from Singapore and its investors had paid Rs 8,000 crore in taxes to shift. Last year, fintech start-up Groww moved its parent entity, Groww Inc, from Delaware to Bengaluru. According to reports, it paid about Rs 1,340 crore tax for domicile shift.
Somdutta Singh, Serial Entrepreneur, Founder and CEO Assiduus Global said earlier, flipping out made sense to raise global capital, simplify compliance, and pursue international listings. But today, the Indian markets themselves are rewarding innovation.
"The Indian government has removed the need for NCLT approval for merging foreign entities with Indian ones, which earlier delayed reverse flips by over a year. Now that burden is off. GIFT City and the IFSC framework are also opening up credible alternatives to overseas holding companies, especially for fintechs and start-ups looking for tax-neutral setups," she added.