Reverse Flip: Razorpay Restructures To Cut Tax, Groww Might Pay $70 Mn In Tax

As fintech major Razorpay looks to shift its headquarters to India, it is reportedly working with consulting firm Deloitte on a company restructuring, which is estimated to result in a tax outgo of up to $200 Mn once the process is completed.

As per an ET report, Razorpay’s US-registered parent entity is working to bring its six India units under a single local holding company, Razorpay Software India, as part of its restructuring exercise. 

This process is said to be critical to reduce Razorpay’s overall tax outgo. “All the six India units will come under Razorpay Software India Pvt Ltd. The restructuring is underway and has been approved based on the advisor’s (Deloitte) view. This will lead to tax gains also,” a source was quoted as saying by the publication. 

Razorpay cofounder and CEO Harshil Mathur told Inc42 earlier this year that the startup was looking to shift its headquarters to India from the US by 2024 end. 

It was reported earlier that the company was planning to reverse flip through a merger of its US and India entities, which could lead to the fintech major coughing up around $300 Mn in taxes to the US government.

The source added that the company has accounted for the tax outgo internally and may only raise fresh funds after redomiciling to India. 

Groww’s $70 Mn Tax Bill

Meanwhile, the other major Indian startups currently riding the reverse flip wave include Groww and Zepto.

Earlier this month, the investment unicorn Groww completed its reverse flip, shifting its domicile to India from the US. As per ET, the startup has accounted for around $60 Mn-$70 Mn in tax for the same.

However, the report also suggests that while Groww has completed the transfer of shareholding from a US unit to the India entity, other formalities, including the calculation of the exact tax payments, are still under process.

On the other hand, Zepto is also preparing for a reverse flipping in 2024 itself. Inc42 reported earlier this year that the quick commerce major is eyeing a reverse flip through a share swap, where shareholders of the Singapore company would receive shares of the Indian entity, and the Singapore entity liquidated. 

As per Indian laws, Zepto’s investors could potentially be taxed at 33%-42% for this transaction, which would result in an outlay of about $600 Mn. However, sources within the company, claim that the quick commerce unicorn is looking to limit its tax exposure to around $100 Mn – $150 Mn. 

Zepto is currently valued at close to $1.4 Bn, and is said to be in talks with investors to raise a $300 Mn round at a valuation of up to $3 Bn. 

A finance professional informed Inc42 that though the tax liability would be very high, the company was looking to take this step in pursuit of a public listing in the next two years.

Fintech unicorn PhonePe’s investors coughed up a massive $900 Mn for its decision to shift its domicile to India from Singapore in late 2022.