Flipkart Mulling Reverse Flip To India With IPO On The Horizon

Flipkart Mulling Reverse Flip To India With IPO On The Horizon

SUMMARY

Flipkart's prospective return to its home country may not only signify a symbolic homecoming but also holds the potential for significant tax benefits for the Indian government

Discussions regarding this potential shift have been ongoing within the senior leadership of the ecommerce giant

The intention to shift its domicile to India is tied to Flipkart's long-term objective of pursuing an initial public offering

Ecommerce major flipkart has initiated talks to redomicile its parent entity to India from Singapore, ET reported.

One of India’s most prominent technology startups and valued at approximately $33 Bn, Flipkart’s prospective return to India is a big symbol for the trend of reverse flipping, which has seen Walmart-owned PhonePe also move its HQ back to India. 

Flipkart Pvt Ltd, the holding entity, currently operates out of Singapore, just like PhonePe did before moving its domicile to India in October 2022.

In PhonePe’s case, the company was valued at close to $10 Bn in 2022 when it redomiciled to India and is said to have shelled out close to $900 Mn+ to register its parent entity in India. The reverse flipping tax in Flipkart’s case is also likely to be significant. 

According to the ET report, Flipkart’s senior leadership has held internal discussions regarding moving the parent entity to India, and plans for the relocation are expected to gain traction in the next few months. 

Flipkart Eyeing IPO

However, executing this transition may pose challenges due to Flipkart’s extensive scale and the involvement of various entities operating its ecommerce ventures in India.

The intention to shift its domicile to India is tied to Flipkart’s long-term objective of pursuing an initial public offering (IPO). While Flipkart doesn’t have immediate plans for an IPO in 2024, recent successful IPOs of consumer companies have demonstrated the market’s appetite for scaled-up consumer businesses on domestic stock exchanges. 

However, the market’s confidence is linked to profitability, where Flipkart has a big gap to close. 

Flipkart Internet Private Limited, the B2C arm of Walmart-owned Flipkart, saw its operating revenue near the INR 15,000 Cr mark in the year ended March 31, 2023. The marketplace arm’s operating revenue zoomed 42% to INR 14,845.8 Cr in the financial year 2022-23 (FY23) from INR 10,477.4 Cr in FY22.

The company also managed to reduce its cash burn, which helped it reduce its net loss by 9% to INR 4,026.5 Cr during the year under review from INR 4,419.5 Cr in FY22.

However, Flipkart’s B2B arm’s net loss increased over 42% to INR 4,845.7 Cr in FY23, as compared to INR 3,404.3 Cr in the previous fiscal year. 

Flipkart is said to be refining its product and cost strategies to achieve profitability. The company ventured into the fintech category with digital lending and UPI payments

In January 2024, the company reportedly kicked off an exercise to trim its workforce that could likely see its total team size reduced by 5-7%. The workforce reduction concluded last month and is part of the ongoing performance review. 

Unicorns Move Back Home

Recently, fintech unicorn Groww completed its reverse flip, shifting its domicile to India from the US. 

Groww became the second major startup after PhonePe to shift domicile to India. A number of other Indian startups, including Zepto, Razorpay, and Pine Labs, are also looking to reverse flip, as most of them are eyeing IPOs in India. 

Secondly, in the case of fintech startups such as PhonePe or Razorpay, having an Indian parent entity is also advantageous from a regulations point of view.  

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