India regulatory reform could hasten homecoming of bound startups
Time to 'reverse flip' reduced to about 3-4 months from at least 12-18 months due to rule change
Several foreign companies in process of completing merger with Indian subsidiary-sources
IPO funds raised in India nearly doubled in first nine months of year to $9.2 bln-LSEG data
By Ashwin Manikandan and Haripriya Suresh
BENGALURU, Oct 10 (Reuters) -India's scrapping of a time-consuming compliance step will accelerate the pace at which Indian startups domiciled abroad shift back home to participate in the country's listing boom, according to bankers, lawyers and investors.
Since last month, foreign-based companies no longer require approval from the backlogged National Company Law Tribunal for a so-called "reverse flip" merger with a domestic subsidiary, effectively reducing the time the process takes to about three to four months from at least 12 to 18 months previously.
Many of the dozens of Indian startups that once chose to be based abroad for better access to capital and smaller tax bills are now queuing to return home from financial hubs such as the U.S. and Singapore due to better initial public offering prospects in a country that does not allow dual listings.
While Razorpay, Pine Labs PINL.NS and KreditBee are in advanced stages of completing the reverse flip, Zepto, Eruditus and InMobi INMO.NS are also trying to finish the merger process in the coming months in preparation for eventual IPOs, multiple sources said.
The sources spoke on condition of anonymity because they were not authorised to speak publicly.
"India is a home market and a place where everybody knows and understands us. From a listing perspective, it makes sense to be in India," said Harshil Mathur, the co-founder and CEO of Razorpay.
The U.S.-domiciled online payments firm was valued at $7.5 billion as of its last fundraising in December 2021 and is looking to shift to India.
IPOs in India including by startups Ola Electric OLAE.NS and FirstCry BRAE.NS have raised $9.17 billion in the first nine months of this year, up from $4.68 billion in the same period last year, according to LSEG data, making the country a rare bright spot for equity capital raising by companies in the Asia-Pacific region.
"With the IPO market thriving, a reverse flip makes sense. Moreover, the streamlined merger process, designed to facilitate swift and efficient scheme approvals without court intervention, further supports this strategic move," said Mehul Shah, a partner at corporate law firm Khaitan & Co.
Before the rule change, only a handful of companies such as Walmart-backed digital payments firm PhonePe PHOP.NS and online investment platform Groww had engineered a reverse flip.
Those processes concluded in October 2022 and March 2024 respectively, though the timing of their India IPO plans remains unclear.
PhonePe had to pay about $1 billion in capital gains taxes to the Indian government to complete the reverse flip, something that its co-founder and CEO Sameer Nigam once termed as a "very stiff shock".
Groww took "several years to finish the process", an executive said on condition of anonymity.
The startups did not respond to requests seeking comment.
"Even without this regulation, last we saw eight to 10 new-age companies were on the path to reverse flip. So, this will encourage (even more of them to follow suit)," Gaurav Sood, head of equity capital markets at investment bank Avendus, said of the rule change.
IN INDIA WE TRUST
The homecoming of the IPO-bound startups is understandable given India's requirement that only local companies list on its exchanges and its ban on dual listings, along with a thin track record of such companies listing overseas.
Moreover, India's central bank and other regulators prefer local firms over their foreign counterparts for key operational licenses such as those required by fintechs, according to industry sources.
Stricter government scrutiny of foreign inflows and business deals have also raised compliance risks for startups, the sources said.
The Reserve Bank of India and India's market regulator did not respond to requests seeking comment.
An IPO in India also offers startup investors a potentially more lucrative exit avenue.
"There is a strong appetite for tech stocks among Indian public investors, retail investors included," said Sandeep Patil, partner, and Asia head at venture capital firm QED Investors.
But while India has eased reverse flipping norms, it is unlikely to unveil related capital gains tax concessions.
India's Commerce Minister Piyush Goyal told the Economic Times in March the Indian startups shifting back home would have
to pay taxes.
"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," Goyal said.
His office did not respond to Reuters' requests for fresh comment.
Startups moving base to India https://reut.rs/3YfjG7k
Indian IPOs in the last decade https://reut.rs/3YfNlgN
Top Indian IPOs in 2024 https://reut.rs/4dIJzB9
Reporting by Ashwin Manikandan and Haripriya Suresh; Editing by Dhanya Skariachan and Jamie Freed
免责声明: XM Group仅提供在线交易平台的执行服务和访问权限，并允许个人查看和/或使用网站或网站所提供的内容，但无意进行任何更改或扩展，也不会更改或扩展其服务和访问权限。所有访问和使用权限，将受下列条款与条例约束：(i) 条款与条例；(ii) 风险提示；以及(iii) 完整免责声明。请注意，网站所提供的所有讯息，仅限一般资讯用途。此外，XM所有在线交易平台的内容并不构成，也不能被用于任何未经授权的金融市场交易邀约和/或邀请。金融市场交易对于您的投资资本含有重大风险。
所有在线交易平台所发布的资料，仅适用于教育/资讯类用途，不包含也不应被视为用于金融、投资税或交易相关咨询和建议，或是交易价格纪录，或是任何金融商品或非应邀途径的金融相关优惠的交易邀约或邀请。
本网站上由XM和第三方供应商所提供的所有内容，包括意见、新闻、研究、分析、价格、其他资讯和第三方网站链接，皆保持不变，并作为一般市场评论所提供，而非投资性建议。所有在线交易平台所发布的资料，仅适用于教育/资讯类用途，不包含也不应被视为适用于金融、投资税或交易相关咨询和建议，或是交易价格纪录，或是任何金融商品或非应邀途径的金融相关优惠的交易邀约或邀请。请确保您已阅读并完全理解，XM非独立投资研究提示和风险提示相关资讯，更多详情请点击 这里。
