The reverse flip: why India's biggest startups are paying thousands of crores to come home

Between October 2022 and March 2026, at least eight of India's largest startups moved their parent companies from Singapore or Delaware back to India. The bill for the ones that disclosed it comes to about ₹13,000 crore in tax alone: close to ₹8,000 crore for PhonePe, ₹1,340 crore for Groww, about ₹2,487 crore for Meesho and about ₹1,245 crore for Razorpay. They paid it willingly, because the alternative was worse.

What is reverse flipping?

Reverse flipping is the process by which an Indian startup that had earlier moved its parent company (its "holding company") abroad brings that parent back to India, so that the Indian operating company becomes the top of the group again. The Economic Survey 2022-23 defined the original "flip" as transferring the entire ownership of an Indian company to an overseas entity, usually along with all intellectual property and data. The reverse flip undoes that, typically by merging the foreign parent into its Indian subsidiary or by having the investors sell their foreign shares and buy Indian ones.

Founders and the business press call it "ghar wapsi". The tax authorities call it a transfer of capital assets. Both descriptions are accurate.

Why did Indian startups move their parent companies abroad?

They moved because their investors asked them to, and because the Indian system of the 2010s gave them reasons to agree.

Y Combinator required its Indian portfolio companies to be Delaware corporations. Groww's Delaware parent was set up in 2016 for exactly that reason. US and Singapore investors wanted a familiar legal system, standard documents, and the ability to resolve disputes outside Indian courts. Flipkart moved its headquarters to Singapore in 2011 for foreign investment and tax reasons. Delaware became the default for software companies selling to American customers, and Singapore for everyone else.

The Economic Survey's list of drivers is a fair summary of the period: investor requirements for specific domiciles, better valuations and larger ticket sizes in overseas capital markets, intellectual property protection, the tax treatment of licensing revenue, founder residential status, and what the Survey called "agile corporate structures". Indian rules on outbound investment made round-tripping (an Indian resident investing abroad into a structure that invested back into India) difficult, which pushed founders to pick one side of the border and stay there.

By May 2023, 20 of India's 108 unicorns were headquartered abroad, around three quarters of them in the United States. About two thirds of those overseas unicorns were SaaS or enterprise software companies. A year later, Tracxn counted around 50 fintechs still domiciled outside India.

What changed to bring them back?

Three things changed at once: the Indian stock market became the better place to list, regulators became easier to deal with from inside the country, and the government rewrote the merger rules to make the return cheaper and faster.

The listing argument is the strongest. An investor told TechCrunch in May 2024 that companies valued under $20 billion get little analyst coverage in the United States, while in India "everything trades at a premium". A domestic IPO needs a domestic parent, or at least a structure that Indian retail investors and SEBI can see through cleanly. Pine Labs, Meesho and Groww all listed in India within months of completing their moves. Razorpay filed a confidential draft prospectus in June 2026, a year after it finished its own.

For fintechs the regulator is the second reason. Vishwas Patel of Infibeam Avenues put it plainly in 2024: investors were ready to carry the tax burden of reverse flipping because valuations in India were better, and the Reserve Bank of India was more comfortable supervising a payments business whose parent sat in India.

The third reason is the law. The Overseas Investment Rules of 2022 relaxed the round-tripping restrictions that had made offshore structures necessary. In September 2024, the Ministry of Corporate Affairs amended the merger rules so that a foreign holding company can merge into its wholly owned Indian subsidiary through the fast-track route under Section 233 of the Companies Act 2013, with prior approval from the Reserve Bank of India, instead of going through the National Company Law Tribunal. In June 2025, SEBI allowed founders to keep employee stock options granted at least a year before filing a draft prospectus and dropped the one-year holding requirement for shares that came from converting compulsorily convertible securities, which removed two problems that reverse-flipped companies kept hitting on the way to an IPO.

Who has reverse flipped, and what did it cost?

The table lists the completed moves with the route used and the tax cost where it was disclosed.

MoEngage received NCLT Bengaluru's approval in January 2026. InMobi, India's first unicorn, said in February 2026 that its move was under way ahead of a planned IPO. Udaan began merging its Singapore holding company into its Indian entity in March 2026. Eruditus, which had planned to file by early 2025, said in May 2026 that it would probably flip back within the next 18 to 24 months.

PhonePe's investors, led by Walmart, sold their shares in the Singapore entity and bought shares directly in PhonePe India, so the move was taxed as a sale instead of being exempted as a merger. Sameer Nigam said in January 2023 that "our investors have paid almost ₹8,000 crores in taxes just to allow us to come back to India". The company also forfeited roughly $900 million of accumulated losses that could no longer be carried forward, and it had to reissue employee stock options to more than 3,000 staff with their vesting clocks reset to zero. Nigam told Inc42 that convincing employees their vesting status had gone back to zero was "very hard", and that around 20 unicorns had contacted PhonePe asking how to get the rules changed.

Meesho's FY25 accounts show what the move does to a profit and loss statement. The headline loss was ₹3,941.7 crore. Strip out the one-time tax and the ESOP and reorganisation charges and the operating loss was ₹108 crore, so about 97 percent of the reported loss was the cost of changing address.

Razorpay's FY25 net loss of ₹1,209 crore was, in the company's own words, driven by restructuring and tax payments associated with the reverse flip. Groww's ₹1,340 crore charge turned FY24 into a loss year of ₹805 crore.

Zepto's chief financial officer called its move the fastest ever, 19 days from the NCLT order to completion. He then went public asking for tax neutrality on the migration of shareholding.

Flipkart's move was the most complex. Seven Singapore transferor companies, including Myntra, Ekart, Cleartrip, Flipkart Health and Super Money, were merged first, and then Flipkart Pvt Ltd itself was merged into Flipkart Internet Pvt Ltd. Because Tencent held a stake of around five to six percent and sits in a country that shares a land border with India, the group also needed government approval under Press Note 3 of 2020. The IPO is targeted for FY27 and Walmart owns about 85 percent.

Dream Sports was the first company to use the September 2024 fast-track route. There was no NCLT hearing; the Regional Director approved the scheme after the Reserve Bank's clearance. Razorpay used the same route five months later. The fast-track process has been running at three to four months against eight to fourteen months for an NCLT scheme.

Why does reverse flipping cost so much tax?

The Indian income tax law exempts a true amalgamation. Sections 47(vi) and 47(vii) of the Income-tax Act 1961, which the Income-tax Act 2025 carries forward under new section numbers from 1 April 2026, say that when an amalgamating company's assets pass to an Indian amalgamated company, and when the shareholders of the amalgamating company receive shares in the Indian company in exchange, neither transfer is taxed. The condition is that the arrangement qualifies as an amalgamation under the Act: all assets and liabilities must pass, and shareholders holding at least three quarters of the value must become shareholders of the Indian company.

That exemption answers the Indian side of a merger. It does not answer four other questions, and those four are where the bills come from.

The first is structure. If the move is done as a share sale or a sale-and-reinvest, as PhonePe's was, it is an exchange and therefore a transfer. Non-resident sellers are taxed under India's indirect transfer rule, because the Singapore shares derived their value from Indian assets. Walmart paid most of PhonePe's bill for exactly this reason.

The second is the foreign country's own exit tax. A Delaware corporation that merges out of the United States is treated under Section 367(a) of the US Internal Revenue Code as if it sold its assets at fair market value. The company pays US tax on the gain between its tax basis and its current valuation. This is what produced the Groww, Meesho and Razorpay charges, and it is why the size of the bill tracks the valuation at the time of the move. Singapore has no capital gains tax, but from 1 January 2024 its Section 10L can tax gains on the disposal of foreign assets by entities that lack economic substance there. Treelife's conclusion on the Groww case: the exit tax cannot be eliminated through structuring, only minimised by timing the flip before the next valuation increase.

The third is losses. Section 79 of the Indian Act lapses carried-forward losses when more than 51 percent of the voting power changes hands, with a specific relaxation for eligible startups, and Section 72A protects losses only in specified businesses. PhonePe's forfeited losses of around $900 million were a casualty of this rule.

The fourth is employee stock options. Options granted by the foreign parent have to be cancelled and regranted by the Indian company. That can trigger perquisite tax for employees and, under Indian rules, a fresh one-year vesting cliff. Meesho's ₹1,346 crore of exceptional ESOP and reorganisation costs are the clearest published example.

The Union Budget 2025-26 widened the fast-track merger route but did not grant tax neutrality to the migration of shareholding, and the Finance Bill 2026 did not either. Entrepreneurs have asked for it; as of October 2026 it has not arrived. Founders should plan on the basis that the tax is real.

Which route should a company use to come back?

There are two main routes under the Companies Act 2013. The first is a scheme of arrangement under Sections 230 to 232, approved by the National Company Law Tribunal. Groww, Zepto, Pine Labs, Meesho and Flipkart used it. It handles complex groups, multiple transferors and contested facts, and it takes eight to fourteen months in practice.

The second is the fast-track merger under Section 233, extended to foreign parents by Rule 25A(5) of the Companies (Compromises, Arrangements and Amalgamations) Rules from 17 September 2024. The foreign holding company and the Indian wholly owned subsidiary both obtain prior approval from the Reserve Bank of India, the Indian company complies with Section 233, and the application goes to the Regional Director rather than the tribunal. A declaration about beneficial owners from land-border countries is filed at the application stage. Dream Sports and Razorpay used this route, and the September 2025 amendment to the merger rules widened fast-track mergers further for unlisted companies with borrowings under ₹200 crore and no defaults, and for holding and fellow subsidiary mergers. Rule 25A(5) itself was left unchanged.

Underneath both routes sit the Foreign Exchange Management (Cross Border Merger) Regulations 2018, which treat an inbound merger as deemed approved by the Reserve Bank if the regulations are followed, and the pricing and sectoral rules of the Non-Debt Instruments Rules 2019.

What should a founder incorporating today take from this?

Our reading of the cases is that the question "where should my company be domiciled" has become mainly a tax question, and that the default answer for a business whose customers, team and future listing are in India has moved firmly to India.

Incorporate in India unless there is a specific, named reason not to. A US customer base that insists on a US contracting entity, a lead investor who will not invest otherwise, or a product that cannot be sold from India are such reasons. Investor preference counts once it is written into a term sheet, and even then it is worth asking the investor what they will do if the company needs to come back in five years.

If a flip abroad is unavoidable, do it as early and as cheaply as possible, and keep the Indian operating company clean: its own intellectual property licences, its own contracts, its own books. Every rupee of valuation added while the parent sits abroad becomes part of the base on which an exit tax is calculated later.

Keep the intellectual property in India where you can. The original flip usually moved the IP with the parent. Bringing it back is a separate transfer with its own valuation and its own tax.

Plan the employee option scheme for the possibility of a reverse flip. A scheme that can be mirrored by an Indian subsidiary with equivalent terms will save the company the morale cost that PhonePe described.

Check your cap table for land-border investors. Flipkart's Press Note 3 clearance added a government approval to a process that was already running through a tribunal and a Singapore court. A small Chinese or Hong Kong holding on the cap table has the same effect on a small company.

Finally, treat the GIFT City option with care. IFSCA's 2023 expert committee recommended a competitive tax regime and reforms to make GIFT IFSC a place where Indian startups could sit as if in a foreign jurisdiction. The recommendations are serious, but we could not find a completed startup redomiciliation to GIFT IFSC as of October 2026.

What the reverse flip says about India as a place to build

Ten years ago the sophisticated advice for a founder with global ambitions was to leave. The companies that followed it have now spent more than ₹13,000 crore, by the disclosed figures alone, to undo the decision. The Indian IPO market, the Reserve Bank's preference for supervising from home, and three rounds of rule changes between 2022 and 2025 have shifted the calculation. A founder who still chooses Delaware or Singapore in 2026 is making a choice with a known price attached.

Frequently asked questions

What does reverse flipping mean for a startup?

Reverse flipping is when a startup that earlier moved its parent company abroad (to Delaware or Singapore, usually) brings the parent back to India, so that the Indian company becomes the holding company of the group. It is done by merging the foreign parent into the Indian subsidiary or by investors swapping their foreign shares for Indian ones.

How much tax did PhonePe pay to move back to India?

PhonePe's investors paid about ₹7,800 to ₹8,000 crore in capital gains tax when they sold their shares in the Singapore entity and bought shares in PhonePe India in 2022. Walmart paid most of it. The company also lost around $900 million of carried-forward losses.

Is reverse flipping tax-free in India?

No. A merger that qualifies as an amalgamation into an Indian company is exempt in India, but the foreign country may levy an exit tax (the United States does, under Section 367 of its code), a share swap or sale is a taxable transfer, carried-forward losses can lapse, and regranted employee stock options can be taxed. Budget 2025 and the Finance Bill 2026 did not introduce tax neutrality for the migration of shareholding.

How long does a reverse flip take?

A scheme through the National Company Law Tribunal has been taking eight to fourteen months. The fast-track route under Section 233 of the Companies Act, available to a foreign parent merging into its wholly owned Indian subsidiary since September 2024, has been running at three to four months. Zepto completed its move 19 days after its NCLT order.

Which startups have reverse flipped to India?

PhonePe (2022), Groww (2024), Dream Sports, Zepto, Pine Labs, Meesho and Razorpay (all 2025) and Flipkart (March 2026) have completed their moves. MoEngage received tribunal approval in January 2026, and InMobi and Udaan have begun theirs.

Should a new Indian startup incorporate in India or in Delaware?

For a business whose customers, employees and eventual listing are in India, an Indian private limited company is the right default. A Delaware or Singapore parent makes sense only for a specific reason, such as a US customer base that requires a US contracting entity or an investor who will not invest otherwise, and the cost of undoing it later grows with the company's valuation.

What is a fast-track merger under Section 233?

Section 233 of the Companies Act 2013 allows certain mergers to be approved by the Regional Director of the Ministry of Corporate Affairs instead of the National Company Law Tribunal. Since 17 September 2024, Rule 25A(5) lets a foreign holding company merge into its wholly owned Indian subsidiary through this route, provided both companies obtain prior approval from the Reserve Bank of India.

Sources

Economic Survey 2022-23, Chapter 9 (Ministry of Finance); Walmart press release of 23 December 2022 on PhonePe's domicile; Reuters and Business Today reports on PhonePe's tax (January 2023); Medianama and TechCrunch on Groww (2024); Inc42 on Dream Sports (March 2025), Meesho (May and October 2025) and Razorpay (May 2025); Business Standard on Zepto (January 2025), Pine Labs (November 2025), Razorpay FY25 results (October 2025) and fintech reverse flips (May 2024); Medianama and TechCrunch on Flipkart (December 2025 and March 2026); MCA notification G.S.R. 555(E) of 9 September 2024 and the Companies (Compromises, Arrangements and Amalgamations) Amendment Rules 2025; FEMA (Cross Border Merger) Regulations 2018; SEBI board decisions of 18 June 2025; IFSCA expert committee report on onshoring Indian innovation (2023); Income-tax Act 1961, Sections 47, 72A and 79; Treelife, Acuity Law and Commenda analyses of reverse flip taxation.