Reverse Flip: Razorpay Parent Plans To Move To India

Bengaluru-based digital payments unicorn Razorpay is reportedly planning to move its parent entity back to India from the US, months after PhonePe shifted its holding company from Singapore to India.

The fintech unicorn has already begun the process of reverse flipping, a person privy to the information told ET. The company has kicked off the first stage of the process to bring its parent entity back to India. Razorpay’s management and board are said to be keen on the move, despite the process being capital-intensive.

Just how capital-intensive? For context, PhonePe had to pay close to $1 Bn in taxes to the Indian government before moving its domicile to India.

Razorpay is also said to be looking at a potential listing in India, though sources cited by ET noted that an IPO was not a priority.

The fintech unicorn’s domicile is in the US as Y Combinator necessitates moving domicile when a startup has to raise funding from an incubator.

Razorpay was the second-ever Indian startup to make it to Y Combinator in 2015, around the time when the incubator had started to look at Indian startups. Similar is the case of Cashfree, another YC-backed payments startup with a parent entity in the US.

Founded in 2014 and valued currently at $7.5 Bn, Razorpay is in a delicate situation as it awaits a final decision on its application with the Reserve Bank of India (RBI) for a payment aggregator licence. The startup has also been barred by the RBI from onboarding new merchants by the RBI till the latter issues a licence.

The move comes as India has set up an expert committee to suggest measures to encourage local startups domiciled abroad to relocate to Gujarat International Finance Tec-City’s International Financial Services Centre (GIFT-IFSC).

Razorpay’s plan also comes after the 2022-23 Economic Survey recommended a multi-step approach to facilitate the reverse flipping of startups.

Reverse Flipping To Pick Up Steam?

Among the six steps presented in the Economic Survey 2022-23 are measures such as simplifying the process for grant of “inter-ministerial board (IMB) certification” for startups, simplification of taxation of employee stock options (ESOPs) and reducing friction by simplifying the “multiple layers of tax and uncertainty due to tax litigation”.

The survey also recommends easing the procedures for capital flows citing the example of geographies such as the US and Singapore, that “have easier corporate laws, with lesser restrictions on the inflow and outflow of capital and treatment of hybrid securities”.

With PhonePe and Razorpay moving back to India, it would be interesting to see how the other startups domiciled abroad would perceive moving to India. Data compiled by Inc42 shows that 20 out of the 108 unicorns in India are headquartered overseas, with around 75% of them being enterprisetech startups.

With events such as the collapse of the Silicon Valley Bank and tightening regulations in the US, more startups might be incentivised to move their domicile back to India.