Tiger Global Backed Groww Likely To Join Fintech Players List In ‘Reverse Flipping’ To India

Two days after reports of digital payments major Razorpay’s reverse flip to India emerged, another US- and India-based fintech player Groww is planning to move its domicile to India through a cross-country merger.

Reverse flipping is when companies that are domiciled in foreign countries want to return to their home country. Fintech players are reverse flipping to India mainly due to the tightening regulatory norms.

The reports of industry majors Razorpay and Groww shifting their respective headquarters to India have been doing rounds since PhonePe moved its domicile to India from Singapore last year. Among several factors, India’s taxation policies stand as a major factor potentially leading to many Indian unicorns to set base outside the country.

It is still unclear about the amount of tax liabilities that Groww would have to incur for a merger of its US holding company, Groww Inc, with the Indian entity, Billionbrains Garage Ventures.  However, as per The Arc’s report, legal experts believe that a merger would likely incur a 21% federal tax in the US as well as additional state taxes. 

On the other hand, Groww might not be further taxed in India due to the double taxation avoidance agreement (DTAA) with the US.

Founded in 2017 by former Flipkart employees Harsh Jain, Lalit Keshre, Neeraj Singh, and Ishan Bansal, invest tech platform Groww allows users to invest in stock markets. Though it primarily operated in India, the startup had first registered itself in the US due to better investment opportunities.

As per the publication, in April this year, Groww had obtained board approval for the merger. Later on, the unicorn applied to the National Company Law Tribunal (NCLT) to initiate the reverse flipping process.

Now, Groww is awaiting clearance from the local tax bodies and the Reserve Bank of India (RBI) due to the Foreign Exchange Management Act  (FEMA) regulations.

It is pertinent to mention here that Razorpay has also undertaken a cross-country merger for its relocation – a move that could incur a tax payment of $250 Mn-$300 Mn in its current domicile, the US.

Razorpay is set to pursue approval from the NCLT within the next two months for the same.

Akshit Goyal, Partner, Goyel & Goyal, told The Arc that the NCLT approval takes around 6-9 months and if the process takes more than 12-18 months for Groww, the company might take the approach PhonePe took for reverse flipping – a share-swap deal with its Singapore entity.

For sure, Groww is currently one of the leading wealth management platforms in India. It had 6.63 Mn active investors at the end of September 2023, surpassing Zerodha’s 6.48 Mn, as per National Stock Exchange (NSE) data.

Groww or Billionbrains Garage Ventures Private Limited turned profitable in FY23 with a consolidated net profit of INR 448.7 Cr in FY23 as against a net loss of INR 239 Cr in FY22. Its operating revenue more than tripled year-on-year to INR 1,277.8 Cr in FY23.

The unicorn is backed by the likes of Tiger Global, Peak XV Partners, Ribbit Capital, and others.