In the recent times, there has been an urgency from start-ups to move bases as India’s IPO market surges and start-ups are looking to tap into opportunities in the domestic market and drive value creation.

Several start-ups that are large firms had set up overseas bases for easier funding, as well as tax policies, are moving their overseas holding companies to India — or ‘reverse flipping’ — ahead of listings.

The trend is gaining popularity among Indian start-ups looking to list on the country’s stock exchanges, despite significant tax liabilities. These include companies engaged in areas such as fintech, e-commerce, stock broking, health care and edtech.

This growing list includes payments firm Pine Labs, which is based in Singapore, Business-to-business (B2B) e-commerce firm Udaan, fintech majors Razorpay, Kreditbee, e-commerce major Meesho, whose parent firm is based in the US. Flipkart and Zepto are also exploring similar moves. Online furniture brand Pepperfry is also one of them. Similarly, edtech major Eruditus is also evaluating if it would be feasible for the edtech start-up to move its base to India.

More recently, Fintech start-up Groww formally moved its domicile back to India from the US through a reverse flip by its parent firm, chief executive officer Lalit Keshre said on Thursday.

Walmart-backed PhonePe, another major fintech start-up, moved its domicile from Singapore to India in October 2022. As part of this, it had to go through three steps. First, it moved all its businesses, including insurance and wealth broking, and all subsidiaries of PhonePe Singapore to PhonePe Pvt Ltd India. Secondly, PhonePe’s board approved creating a new employee stock ownership plan (ESOP) and migrating more than 3,000 PhonePe group employees. PhonePe’s investors, led by Walmart, had to pay about ₹8,000 crore in taxes to allow the fintech firm to shift its domicile to India.

Reasons for reverse flip

In March last year, the government noted that many Indian start-ups were domiciled abroad and set up a committee to suggest ways “to onshore the Indian innovation” to the International Financial Services Centre in the Gujarat International Finance Tec-City.

“India as a market for an IPO (will) make sense (even) after a year or so, even as it (the company) works on cutting costs further and turning profitable,” said an investor.

Experts said it helped to be in India if one was gearing up to list on the country’s stock exchanges through an initial public offering (IPO). Other factors include the rise of technology firms in India, investor confidence, a resilient economy and supportive government policies.