Flipkart ’s decision to relocate its holding company from Singapore to India on Monday marked the latest in a series of high-profile reverse flips by Indian startups , joining the likes of PhonePe, Groww, and Zepto in re-domiciling their parent entities back home.
The trend, once considered complex and time-intensive, is gaining traction as regulatory clarity improves and India’s capital markets deepen. While the motivations range from IPO readiness to investor alignment, the mechanics of reverse flipping still require careful structuring, especially on the tax and compliance fronts.
PhonePe completed its reverse flip in October 2022, followed by Groww in May 2024 and Zepto earlier this year. Several others, including Pine Labs, Razorpay, and Meesho, are exploring similar shifts, industry executives said.“Reverse flipping has become more feasible today due to a combination of regulatory reforms and growing alignment with India-focused investor expectations,” said Kosha Thakkar, partner at Trilegal.
A key enabler has been last year's amendment to Rule 25A of the Companies (Compromises, Arrangements and Amalgamations) Rules, which now allows inbound mergers of foreign holding companies through a fast-track route. This bypasses the need for National Company Law Tribunal (NCLT) approvals, cutting down execution timelines from over a year to roughly 3-6 months. For companies opting for a share swap structure, the August 2024 amendment to the Non-Debt Instrument (NDI) Rules has eliminated the need for prior RBI approval on the FDI leg, provided sectoral norms are met.
Relaxations under the Companies Act, simplified FDI norms, and reduced corporate tax rates are also making India a more attractive jurisdiction to anchor global operations.
With India’s public markets now better equipped to absorb tech IPOs, startups are also aligning domicile decisions with investor appetite. “India-focused companies are seeing stronger valuations domestically and more realistic IPO timelines, especially with institutional investors preferring Indian structures,” Thakkar said.
Despite the momentum, the process remains structurally demanding. Whether via inbound mergers or share swaps, reverse flips often require regulatory engagement across multiple jurisdictions, liquidation of foreign entities, and Esop realignment.
“There is limited judicial precedent in India on taxing offshore transfers after the amendment made in the Income Tax Act 1961, to tax indirect transfers. While Section 9 of the act and prescribed valuation rules provide the framework, there's still considerable ambiguity in its interpretation," Hemen Asher, partner, Bhuta Shah & Co, told TOI.
"Foreign investors face multiple challenges while computing capital gains. "For example, attribution of value to the India business, adoption of standalone financials versus consolidated financials, interplay of the taxability vis-a-vis the specified date... Though the Rules have prescribed the valuation methodology, there is no one size fit all solution available," Asher said.
Additionally, if an offshore structure includes investors from China, it can further complicate the reverse flip, often triggering prolonged commercial negotiations -- either to facilitate their exit or to share a portion of the associated tax burden, Asher added.
Multi-layered holding structures and historical shareholder agreements require renegotiation, particularly for companies with legacy rights, convertibles, or offshore Esop that don’t comply with Indian laws. “Reverse flipping is far from a plug-and-play process. It takes diligence, but the macro environment in India is making it increasingly worth the effort,” Thakkar added.
The trend, once considered complex and time-intensive, is gaining traction as regulatory clarity improves and India’s capital markets deepen. While the motivations range from IPO readiness to investor alignment, the mechanics of reverse flipping still require careful structuring, especially on the tax and compliance fronts.
PhonePe completed its reverse flip in October 2022, followed by Groww in May 2024 and Zepto earlier this year. Several others, including Pine Labs, Razorpay, and Meesho, are exploring similar shifts, industry executives said.“Reverse flipping has become more feasible today due to a combination of regulatory reforms and growing alignment with India-focused investor expectations,” said Kosha Thakkar, partner at Trilegal.
A key enabler has been last year's amendment to Rule 25A of the Companies (Compromises, Arrangements and Amalgamations) Rules, which now allows inbound mergers of foreign holding companies through a fast-track route. This bypasses the need for National Company Law Tribunal (NCLT) approvals, cutting down execution timelines from over a year to roughly 3-6 months. For companies opting for a share swap structure, the August 2024 amendment to the Non-Debt Instrument (NDI) Rules has eliminated the need for prior RBI approval on the FDI leg, provided sectoral norms are met.
Relaxations under the Companies Act, simplified FDI norms, and reduced corporate tax rates are also making India a more attractive jurisdiction to anchor global operations.
With India’s public markets now better equipped to absorb tech IPOs, startups are also aligning domicile decisions with investor appetite. “India-focused companies are seeing stronger valuations domestically and more realistic IPO timelines, especially with institutional investors preferring Indian structures,” Thakkar said.
Despite the momentum, the process remains structurally demanding. Whether via inbound mergers or share swaps, reverse flips often require regulatory engagement across multiple jurisdictions, liquidation of foreign entities, and Esop realignment.
“There is limited judicial precedent in India on taxing offshore transfers after the amendment made in the Income Tax Act 1961, to tax indirect transfers. While Section 9 of the act and prescribed valuation rules provide the framework, there's still considerable ambiguity in its interpretation," Hemen Asher, partner, Bhuta Shah & Co, told TOI.
"Foreign investors face multiple challenges while computing capital gains. "For example, attribution of value to the India business, adoption of standalone financials versus consolidated financials, interplay of the taxability vis-a-vis the specified date... Though the Rules have prescribed the valuation methodology, there is no one size fit all solution available," Asher said.
Additionally, if an offshore structure includes investors from China, it can further complicate the reverse flip, often triggering prolonged commercial negotiations -- either to facilitate their exit or to share a portion of the associated tax burden, Asher added.
Multi-layered holding structures and historical shareholder agreements require renegotiation, particularly for companies with legacy rights, convertibles, or offshore Esop that don’t comply with Indian laws. “Reverse flipping is far from a plug-and-play process. It takes diligence, but the macro environment in India is making it increasingly worth the effort,” Thakkar added.
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