Sameer Nigam, CEO of Walmart-owned PhonePe, said regulations around companies shifting domicile to India should be made easier for businesses.
“I think law needs change because it is not progressive and disincentivises India-based start-ups from changing domicile. Our investors paid almost ₹8,000 crore in taxes just to allow us to come back to India, and that’s a very stiff shock if the business is not yet at maturity and a few years away from an IPO,” said Nigam.
He added that PhonePe also had to convince thousands of employees that they will be back to zero vesting one-year cliff after the domicile shift. This is because Indian law says if a company migrates the ESOP plan, it has to start with a new one-year cliff.
Further, Nigam said this domicile change has also put PhonePe in the spot to lose $900 million of accumulated loss by the end of March 2023 because Indian law considers domicile change as a restructuring event. Essentially, there is no distinction in the law between a restructuring where the pre- and post-beneficial owners are the same compared with another acquisition event.
Generally, pre-profit Indian start-ups that do not have to change domicile and have the opportunity to offset some taxes when the company becomes profitable. However, PhonePe will not be able to avail this benefit, said Nigam
Speaking at a YouTube live session hosted by the company on Wednesday, Nigam also highlighted that 20-odd start-up unicorns in India are interested in shifting their domicile to India and have already reached out to PhonePe enquiring about the process. He was addressing questions about PhonePe’s $350-million fundraise, company redomicile from Singapore to India and its future plans.
Talking about the reason for the redomicile, Nigam said, ‘’I think for the mission PhonePe is on — which is solving for at-scale financial inclusion and digitisation — the move to India was right; India is where we started and where we are focused on. And to that end, for various reasons like being a highly regulated entity and wanting to eventually list here, the change of domicile for PhonePe as a business and as a company is the right answer.’’
Further, PhonePe CTO and co-founder Rahul Chari spoke about the company’s future plans and said the company wants to play an important role in fulfilling the ambition of taking digital payments in India to a billion transactions a day, from close to half a billion, with NPCI, RBI and the entire fintech ecosystem.
“We want to actually help scale payments with a whole bunch of new initiatives that are coming on UPI. We will be looking at launching new products and offerings — be it lending on the merchant side, lending on the consumer side, a lot of new open API initiatives like account aggregator and ONDC. I think India is just going to explode on the digital front and with the kind of patient capital backing us, we’d love to actually play a small role and move it over time,” Chari added.