A startup collective is asking for regulatory reform to assist Indian-origin startups re-domicile from abroad, as stress builds to listing on booming native inventory markets.
The Startup Coverage Discussion board (SPF)—which represents over 50 tech companies—mentioned it has urged the Indian authorities to create a devoted “Ease of Reverse Flip Taskforce” to streamline the complicated means of shifting an organization’s holding construction, often from the US or Singapore again, to India.
“Regardless of current volatility and bearish positioning, India continues to be the popular vacation spot for Indian firms seeking to go public,” Shweta Rajpal Kohli, President and CEO of the Startup Coverage Discussion board (SPF), informed YourStory. “Streamlining the reverse flipping course of is not going to solely assist scale back compliance prices, but additionally supply higher readability on timelines when planning for an IPO.”
The attraction of residence has grown stronger for Indian startups that when flocked to Delaware or Singapore for regulatory ease or VC entry. With India’s capital markets booming—and public buyers rewarding shopper tech IPOs with beneficiant valuations — firms like Zepto, Groww, PhonePe and Pine Labs have already flipped again. Razorpay, and Meesho are within the course of.
“Startup Coverage Discussion board (SPF) appreciates the federal government’s efforts to encourage Indian startups based mostly overseas to maneuver their headquarters again to India,” Kohli mentioned.
“The federal government has already simplified almost 80% of the reverse flipping course of, making it considerably simpler for startups to shift their domicile to India. Addressing the remaining 20% might meaningfully scale back compliance challenges and improve IPO preparedness throughout the startup ecosystem,” She added.
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Nevertheless SPF warns that purple tape might gradual momentum—significantly for firms racing to satisfy IPO home windows.
One of many most important issues is the restricted applicability of the fast-track merger mechanism. As per present guidelines, this expedited route is restricted to mergers involving wholly owned subsidiaries. Most startups, nonetheless, function by means of buildings that embody minority buyers or a number of entities, thereby making them ineligible for fast-track processing.
In such instances, firms are required to undergo the standard route beneath which entails looking for approval from the Nationwide Firm Legislation Tribunal (NCLT). This provides time, authorized value, and procedural complexity to the method.
The NCLT route itself presents a second problem. For startups planning to re-domicile and subsequently listing in India, delays in securing tribunal approval can considerably have an effect on IPO timelines.
Though a 2024 modification to the Corporations Guidelines eliminated NCLT necessities for mergers between a overseas holding firm and its wholly owned Indian subsidiary, startups with extra complicated shareholding patterns nonetheless fall outdoors this exemption.
NCLT proceedings contain stakeholder consultations, regulatory clearances, and judicial scrutiny, which regularly lengthen the timeline to greater than a 12 months.
One other procedural bottleneck entails overseas direct funding (FDI) laws—particularly for investments from nations that share a land border with India. Since 2020, India has required prior authorities approval for any direct or oblique investments from entities based mostly in these nations, together with China. This rule, launched on nationwide safety grounds, applies even when present buyers from these nations must be issued new shares throughout a reverse flip.
Because of this, startups with such buyers face prolonged wait instances and extra compliance necessities when attempting to restructure their possession beneath Indian jurisdiction.
Taxation additionally complicates reverse flips. Share swaps—a typical methodology the place overseas shareholders trade their shares for shares within the Indian entity—are handled as taxable occasions beneath Indian legislation. These swaps are thought-about a switch of capital belongings and should entice capital positive aspects tax.
In lots of instances, this tax publicity compels startups to contemplate various buildings, similar to inbound mergers, that are extra complicated however could qualify as tax-neutral if particular situations beneath the Revenue Tax Act are met. Though inbound mergers could supply aid, they demand extra authorized and regulatory planning, additional slowing down redomiciliation.
The group additionally revealed it’s making ready a Reverse Flip Playbook in partnership with legislation agency AP & Companions and tax consultancy Aeka Advisors, aimed toward guiding founders by means of the still-cumbersome steps of re-domiciliation.
Edited by Jyoti Narayan
