Razorpay Moves Domicile To India

SUMMARY

As part of the restructuring, Razorpay’s Delaware-based entity has now merged with its Indian subsidiary–Razorpay Software India Pvt Ltd

The startup has not yet revealed how much tax they had to cough up to the US government, but was working on its restructuring process to reduce its tax liability

The development comes over a month after the Bengaluru-based startup changed its legal name to ‘Razorpay Software Limited’

Nearing its initial public offering (IPO) preparation, fintech major Razorpay has completed the reverse flip, merging its Delaware-registered parent entity with Indian subsidiary, Razorpay Software India Pvt Ltd, to consolidate operations in the country

“Yes, we’ve officially completed our reverse flip, and we couldn’t be more proud. This move marks a pivotal milestone in Razorpay’s journey,” said Shashank Kumar, cofounder and managing director at Razorpay.

This comes over a month after the startup converted into a public company. Back then, Razorpay said in a regulatory filing that it got the approval of its members at an extraordinary general meeting held on March 27 to change its name to ‘Razorpay Software Limited’ from ‘Razorpay Software Private Limited’.

Moneycontrol was the first to report the development.

According to earlier estimates, the tax liability to the US government for Razorpay’s cross-border domicile shift was estimated between $250-300 Mn. But to reduce their tax liability, Razorpay’s US-registered parent entity decided to bring its six India units under a single local holding company, Razorpay Software India, as part of its restructuring exercise. This process was said to be critical to reduce the startup’s overall tax outgo and bring it down to $200 Mn.

However, the startup has not yet revealed how much tax they had to cough up to the US government to complete its domicile shifting process.

For perspective, wealthtech startup Groww had to pay INR 1,340 Cr in taxes to the US government which pushed its books into the red, posting a net loss of INR 805 Cr in the financial year ended March 31, 2024. (FY24). The startup shifted its domicile to India last year.

Founded in 2014 by Kumar and Harshil Mathur, Razorpay is an omnichannel payments and banking platform which offers payroll management, banking, lending, payments, insurance, among others.

On the financial front, the Peak XV-backed startup reported a profit of INR 33.5 Cr in FY24, a 365% jump from INR 7.2 Cr it reported in the previous fiscal year. Its operating revenue rose by 9% to INR 2,475 Cr in the year under review as against INR 2,283 Cr in FY23.

Amid the IPO boom in new-age startups, many entities started queuing to shift their domicile to India. These include names like Flipkart, Zepto, Pine Labs, Mensa Brands, Udaan and Eruditus.