From Global to Local: Which Startups Are Flocking Back to India?

US-based fintech Groww has shifted its domicile to India, reflecting a growing trend among startups to reverse-flip to India. Which other prominent startups are planning to relocate? What are the tax implications, and what are they waiting for? Read on..

Swati Dayal
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The Homecomings

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Tiger Global-backed fintech startup Groww disclosed its decision to reverse flip or in other words relocate its holding company's domicile from the United States to India.

During the 8th Anniversary celebrations, Founder and CEO Lalit Keshre made the announcement, highlighting the strategic move amidst conducive economic policies and a burgeoning domestic market.

"As of March 2024, Groww has completed its domicile transition back to India. For our customers, we have always been an India-based organisation for all practical purposes since day 1. With this update, the Groww group and its subsidiaries are completely based in India," the CEO later shared on a social networking site.

While the specifics of tax liabilities resulting from the merger between Groww's US holding company, Groww Inc, and its Indian counterpart, Billionbrains Garage Ventures, remain undisclosed, the transition marks a significant milestone for the company's operational framework.

Groww Surpasses Zerodha in Active Investor Numbers

Groww's ascent in the financial services landscape was further underscored by its surpassing of Zerodha in active investor numbers last year.

National Stock Exchange (NSE) data revealed that Groww boasted 6.63 million active investors by September 2023, outpacing Zerodha's 6.48 million.

Fiscal Success and Profitability Milestones

Amidst its operational strides, Groww achieved profitability in the fiscal year 2023, reporting a consolidated net profit of Rs 448.7 crore compared to a net loss of Rs 239 crore in the previous fiscal. Its operating revenue witnessed an impressive threefold increase, totalling Rs 1,277.8 crore in FY23.

Why Are Startups Reverse-Flipping to India?

In recent years, India's startup ecosystem has flourished, witnessing a surge in innovative ventures. A notable trend amidst this growth is the phenomenon of reverse flipping, where startups originally incorporated in offshore jurisdictions are now relocating their holding companies back to India. This shift signifies a maturing perception of India's startup environment and its attractiveness for businesses.

With supportive policies, access to funding, talent, and infrastructure, India has become an ideal destination for startups. Government initiatives, including tax incentives and ease of doing business reforms, further bolster the ecosystem. Additionally, India's vast consumer market offers immense opportunities across sectors.

The return of startups like Pepperfry, Urbanladder, and PhonePe reflects the advantages of reverse flipping, including access to domestic capital, enhanced brand credibility, and knowledge transfer. Moreover, their expansion contributes to job creation and economic growth, fostering innovation and entrepreneurship.

Overall, reverse flipping strengthens India's startup ecosystem, encouraging regulatory improvements and positioning India as a favorable destination for both domestic and foreign companies.

There are many prominent startups whose news about moving back to India is circulating in the media. Let's take a look at them.

Pine Labs Pursues Cross-Border Merger

Payments giant Pine Labs and quick commerce firm Zepto are among the latest companies planning to shift their headquarters to India. Pine Labs is currently seeking approval for a cross-border merger of its Singapore-based holding company with its Indian operations. The company has approached both the National Company Law Tribunal (NCLT) in India and regulatory authorities in Singapore to facilitate the process, according to official filings.

According to some media reports, Pine Labs' proposal awaits deliberation in Singapore, while anticipation mounts for an NCLT hearing in India soon. 

Zepto in Advanced Stages of Transition

Similarly, Zepto is also reportedly in the final stages of filing a similar application. The company is diligently evaluating the most efficient tax options amidst the relocation process. With its valuation reaching $1.4 billion after a $200 million funding round last year, Zepto's move signifies a strategic shift in its operational focus.

Meesho Eyes Fresh Funding for Tax Obligations

In parallel, Meesho, an online shopping platform, is also reportedly exploring avenues to raise additional funding to address the tax implications associated with its return to India. The company aims to navigate the financial challenges seamlessly as it realigns its base to capitalize on domestic market opportunities.

KreditBee - Joining the Movement

KreditBee, a lending tech startup, is also poised to relocate its headquarters from Singapore to India, joining the ranks of companies making the strategic shift. During its Series D funding round, the company unveiled a triumphant $9.4 million extension. As a result, in December 2023, the company disclosed its intention to go public within the next three years. KreditBee has been diligently crafting its relocation strategy for some time, navigating through the complexities of determining its tax obligations.

Piyush Goyal Affirms Tax Obligations for Startups Returning to India

According to ET, Commerce and Industry Minister Piyush Goyal clarified the government's position on concerns raised by Indian-origin startups regarding the imposition of substantial taxes when relocating their domicile back to India. He emphasized that such entities must fulfill tax obligations upon onshoring themselves.

“These companies went outside for their own selfishness…not because of any pressure or other reason. They wanted to do better tax planning…they enjoyed that benefit. Why they want to come back is not an altruistic motive. They want to list in India because here’s where you get the valuations. India’s growth story is unparalleled in the world and that’s why they want to come here,” he said.

His remarks underscore the government's stance on taxation issues surrounding the relocation of startups, highlighting the broader context of India's burgeoning startup ecosystem and its allure for businesses seeking growth opportunities. 

Tax Implications and Strategic Considerations to Reverse Flip

This trend signals a paradigm shift in the landscape of global tech ventures, with India emerging as a preferred destination for innovation, growth, and investment.

The move underscores a broader trend of Indian-origin companies opting to relocate from the US or Singapore back to India, driven by regulatory factors, market dynamics, and strategic imperatives.

The decision to reverse flip to India stems from the desire to leverage the favorable economic climate and burgeoning valuations in the domestic market. However, concerns regarding tax liabilities loom large for these companies, with tax obligations varying based on company valuation and the chosen route for relocation.

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