Indian Startups Reverse Course: Domicile Shift Back to India Gains Momentum

After years of establishing legal headquarters abroad, a growing number of Indian startups are choosing to shift their domicile back to India. This “reverse flipping” trend is gaining traction, with companies like Razorpay, Udaan, Pine Labs, and Meesho leading the way by reversing their earlier decisions. Zepto has already completed its transition. the driving forces behind this shift include improved prospects for Initial Public Offerings (IPOs), easier regulatory compliance, and India’s robust economic growth, making the domestic market increasingly attractive for these ventures.

The process of shifting domicile is not without its challenges. Companies face the need for multiple legal and regulatory approvals, along with the burden of taxes. However, the allure of India’s maturing capital market is proving to be a strong incentive. Alok Bathija, Partner at Accel, highlighted the disparity in listing requirements between India and the United States.

The Allure of Indian Markets

According to Alok Bathija, Partner at Accel, a software firm with $50 million to $60 million in revenue can now list in India.However, a similar listing in the U.S. would require nearly $500 million in revenue. This meaningful difference makes the Indian markets more accessible and appealing to a wider range of startups. The promise of higher valuations and greater accessibility is a key factor driving the decision to relocate.

While a software firm with $50-$60 million in revenue can now list in India, a similar listing in the US would require nearly $500 million in revenue.
Alok Bathija, Partner at Accel

Simplified Compliance for Fintech Startups

Beyond the appeal of IPOs, bringing headquarters back to India simplifies regulatory compliance, particularly for fintech startups. Many of these firms generate the majority of their revenue within India and operate under its financial system. Aligning with domestic regulations, therefore, makes logical sense. Amit Nawka, Partner at PwC, emphasized the crucial role fintechs play in India’s financial landscape and the benefits of being headquartered locally.

As far as fintechs are concerned, as they get larger and contribute to India’s financial system, it is indeed indeed appropriate for them to be headquartered here, and it also gives regulators a sense of comfort.
amit Nawka, Partner at PwC

The Rise of domestic Funding Options

Another significant factor driving the shift is the increasing availability of domestic funding options. In the past, startups based abroad had easier access to global investors, especially U.S.-based venture capital firms. Though, this is no longer a necessity. Siddarth Pai, co-chair at the Indian Venture and Alternate Capital Association (IVCA), pointed out that family offices and domestic venture capital funds are now filling the funding gap.

The abolition of the angel tax has further encouraged many startups to shift their base back to india. This tax, which previously affected investments in startups, has been removed, making India a more attractive destination for early-stage funding.

Not just the IPO-bound startups, but a whole host of other startups are looking to flip back to India, especially those in regulated areas. It becomes easier for a company to plan its expansion and get approvals for setting up new businesses if its parent company is regulated by RBI or Sebi.
Siddarth Pai,co-chair at the indian Venture and Alternate Capital Association (IVCA)

The Numbers Behind the Trend

Industry estimates suggest that more than 70 startups are currently in the process of shifting their headquarters to India,including at least 20 major ecosystem players. However, approximately 500 Indian startups remain domiciled abroad, primarily in the U.S. and Singapore. One of the most notable companies to return was PhonePe,which paid Rs 8,000 crore in taxes to move its registration from Singapore to India. Sameer Nigam, co-founder & CEO of PhonePe, emphasized the company’s commitment to India.

India is where we started, India is where we are focused, and India is where we will stay for decades.
Sameer Nigam, co-founder & CEO of PhonePe

Government Initiatives and Streamlined Processes

The Indian government has taken steps to streamline the process for startups looking to shift back.Previously, an overseas startup merging with its Indian arm required national Company Law Tribunal (NCLT) clearance, a time-consuming procedure. Now, only government and RBI approvals are needed, making the transition faster and more efficient.

india’s Robust IPO Market

The strong performance of Indian tech stocks has also dispelled the notion that startups must list on NASDAQ to achieve high valuations. Varun Malhotra, Partner at Quona Capital, highlighted the strength of India’s IPO market.

India is one of the most robust IPO markets globally. In the last year alone, India had the highest number of IPOs globally, and second in value to the US.
Varun Malhotra, Partner at Quona Capital

In 2024, India saw 327 companies listing, compared to 183 in the U.S.,125 in Europe,and 98 in china,demonstrating the vibrancy of the Indian IPO market.

Razorpay’s Outlook

For startups like Razorpay, moving back to India was a clear and logical choice.While the company is paying over $100 million in taxes for the transition, CEO and co-founder Harshil Mathur believes it is a worthwhile investment.

The process of going public in India is much more streamlined today, making it a natural choice for startups like ours to grow and thrive in one of the world’s most dynamic economies.For Razorpay, reverse flipping aligns us closer to our primary market.India understands what Razorpay does, and it just makes logical sense for us to list on the market where people know us.
Harshil Mathur, CEO and co-founder of razorpay

Looking Ahead

With India emerging as a global startup hub, the trend of reverse flipping is expected to accelerate. Sunil Khaitan,head of the financing group at Goldman Sachs India,anticipates this momentum to pick up in 2025,further solidifying India’s position as a key player in global entrepreneurship. As regulatory reforms continue and domestic investment options expand, the era of Indian startups incorporating overseas may soon become a thing of the past.