Walmart-owned e-commerce giant Flipkart is reportedly planning to reverse-flipping its business by moving its domicile from Singapore back to India. The $33 billion company’s potential move could provide a substantial tax gain for the Indian government and signals a growing trend among Indian startups previously domiciled abroad.
Flipkart’s decision to relocate its domicile is linked to its eventual IPO plans, now slated for 2025-2026 instead of this year. The e-commerce giant is intensifying efforts to achieve profitability. It eyes a valuation of approximately $60 billion at the time of its listing, which may take place in India and other geographies, including the US.
The e-commerce giant’s move follows a similar pattern adopted by fintech startup Groww, which recently announced its transition from a US domicile to India. Groww CEO Lalit Keshre stated in March 2024 that the company has fully transitioned its domicile, with Groww and its subsidiaries now entirely India-centric.
Reverse-flip gaining traction among startups
This reverse-flipping trend is gaining momentum among Indian startups across various sectors, including fintech, e-commerce, edtech, and quick-commerce. Companies such as PhonePe, Pine Labs, Razorpay, Zepto, Eruditus, Meesho, and Udaan are also considering or have already initiated plans to shift their domiciles to India.
Industry leaders suggest that revers-flipping is motivated by the potential for enhanced valuations in India’s increasingly receptive public markets. Historically, many startups established holding companies overseas to facilitate foreign investment under the then-prevailing regulations.
However, with the evolving regulatory environment and the rise of technology firms in India, coupled with investor confidence and supportive government policies, startups are now finding it advantageous to be domiciled in India, mainly when gearing up for IPOs on Indian stock exchanges.
Tax Implication Catalyzing Reverse-Flip Trend
The tax implications of these domicile changes are substantial, with startup founders acknowledging significant domestic and international tax liabilities. In the case of PhonePe, which moved its domicile from Singapore to India in October 2022, investors led by Walmart had to pay around Rs 8,000 crore in taxes to facilitate the transition.
The Indian government has taken note of this trend, with a committee set up in March last year to suggest ways to “onshore the Indian innovation” to the International Financial Services Centre in the Gujarat International Finance Tec-City.
As India’s e-tailing sector is poised for fivefold growth, reaching an estimated $300 billion by 2030, Flipkart is well-positioned to capitalize on this trend. The company’s flagship festival sales event, “The Big Billion Days” (TBBD) 2023, saw 1.4 billion customers visiting its platform, highlighting the increasing adoption of e-commerce in tier-2 and beyond cities.
With e-commerce giant Flipkart’s potential reverse-flipping and the growing list of Indian startups following suit, the startup ecosystem is witnessing a significant shift that could have far-reaching implications for the country’s economy and the global perception of India as a thriving hub for innovation and entrepreneurship.
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