A growing number of Indian-origin companies are ‘reverse flipping‘ – shifting their domicile back to India from overseas because of attractive stock market valuations and to avoid trouble on the regulatory front.
While fintech players PhonePe, Groww and Pine Labs have reverse-flipped, other startups like Razorpay, Meesho, Udaan, and Zepto are working towards shifting base to India.
The rich multiples of the local stock market make India an attractive place to launch initial public offerings compared to the US primary market. “The listing of Zomato has demonstrated that the Indian stock market rewards new-age, internet companies with high valuations. While the US market is experiencing significant activity in software, the Indian market hasn’t yet seen a comparable number of software product companies going public. This untapped demand is attractive to Indian startups,” said Siddharth Pai, founding partner of 3one4 Capital and co-chair of the Indian Private Equity and Venture Capital Association (regulatory affairs). According to Pai, these companies are household names, and many Indian retail investors are eager to participate in their growth. Listing in the US would deny Indian investors this opportunity.
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Listings in India outpaced Hong Kong last year and the momentum is seen as continuing this year. Ola Electric, Swiggy, FirstCry, among other companies, are preparing for their debuts on the Indian stock market.
Regulations prevent foreign-registered companies from launching IPOs in India, securing NBFC, payment licenses from RBI and exporting certain types of data (like street view, payment information) from here. Over the past few years, India has introduced new regulations to make consumer internet and e-commerce companies more accountable to local regulators. The Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Rules require “significant social media intermediaries” to have a resident chief compliance officer and a nodal officer in India, necessitating a physical presence and increased accountability to Indian courts and govt. Similarly, in the geospatial sector, govt has restricted the collection, processing, and storage of street view data to Indian-controlled companies. RBI has also implemented data localisation regulations to ensure that the payment data collected by payment systems remains in India.
“These regulations significantly contribute to a company’s decision to shift its domicile back to India, especially if a significant portion of its target consumers are in India. Investors also want to secure their interests in the intellectual property and data collected by these ventures,” said Aasish Somasi, associate partner at SNG Partners.
Digital payments company PhonePe, owned by US retailer Walmart, re-domiciled to India from Singapore in 2022. Financial services firm Groww followed a similar approach, re-domiciling to India from the US in March 2024. Edtech firm Eruditus is preparing to shift its domicile to India from Singapore for a stock market listing.
Many Indian-origin startups registered their holding companies in Singapore, the US, and Dubai for easier access to foreign capital and tax incentives. “Foreign investors also preferred startups to be incorporated outside India due to legal comfort in contract enforcement and ease of exiting a venture,” said Bhavin Shah, private equity leader at PwC India. Another factor that drove startups abroad was access to high-paying customers in the US and Europe, who perceive services from these regions as high quality.
“For many data-driven startups catering to such customers, the US serves as a gateway to European customers. The EU-US data protection framework allows US-domiciled companies to serve EU customers without the stringent privacy regulations imposed by the General Data Protection Regulation (GDPR) on companies domiciled elsewhere, including India,” said SNG Partners’ Somasi.
