The shift is not straightforward, with companies requiring multiple legal and regulatory approvals and paying significant taxes. However, India’s maturing capital market is providing a compelling reason for startups to return. Alok Bathija, Partner at Accel, said that while a software firm with $50-$60 million in revenue can now list in India, a similar listing in the US would require nearly $500 million in revenue. With Indian markets offering higher valuations and greater accessibility, more startups are choosing to relocate.Beyond IPO aspirations, bringing headquarters back to India simplifies regulatory compliance, especially for fintech startups. Many of these firms generate most of their revenue within India and operate under its financial system, making it logical to align with domestic regulations. Amit Nawka, Partner at PwC, pointed out that fintechs play a crucial role in India’s financial landscape and benefit from being headquartered locally. “As far as fintechs are concerned, as they get larger and contribute to India’s financial system, it is appropriate for them to be headquartered here, and it also gives regulators a sense of comfort,” he said.
Another major factor driving the shift is the rise of domestic funding options. Earlier, startups based abroad had easier access to global investors, particularly US-based venture capital firms. But that is no longer a necessity. Siddarth Pai, co-chair at the Indian Venture and Alternate Capital Association (IVCA), highlighted how family offices and domestic venture capital funds are now filling the gap. “Not just the IPO-bound startups, but a whole host of other startups are looking to flip back to India, especially those in regulated areas. It becomes easier for a company to plan its expansion and get approvals for setting up new businesses if its parent company is regulated by RBI or Sebi,” he said. The abolition of the angel tax has further encouraged many startups to shift their base back to India.
Industry estimates suggest that more than 70 startups are currently in the process of shifting their headquarters to India, including at least 20 major ecosystem players. However, around 500 Indian startups are still domiciled abroad, mainly in the US and Singapore. One of the most high-profile companies to return was PhonePe, which paid Rs 8,000 crore in taxes to move its registration from Singapore to India. PhonePe co-founder & CEO Sameer Nigam said that for a highly regulated company like theirs, the decision was clear. “India is where we started, India is where we are focused, and India is where we will stay for decades,” he said.
The Indian government has taken steps to streamline the process for startups looking to shift back. Previously, an overseas startup merging with its Indian arm required National Company Law Tribunal (NCLT) clearance, a time-consuming procedure. Now, only government and RBI approvals are needed, making the transition faster.
At the same time, the rally in Indian tech stocks has dispelled the belief that startups must list on NASDAQ to achieve high valuations. “India is one of the most robust IPO markets globally. In the last year alone, India had the highest number of IPOs globally, and second in value to the US,” said Varun Malhotra, Partner at Quona Capital. In 2024, India saw 327 companies listing, compared to 183 in the US, 125 in Europe, and 98 in China.
For startups like Razorpay, moving back to India was an obvious choice. The company is paying over $100 million in taxes for the transition, but CEO and co-founder Harshil Mathur believes it is a worthwhile investment. “The process of going public in India is much more streamlined today, making it a natural choice for startups like ours to grow and thrive in one of the world’s most dynamic economies. For Razorpay, reverse flipping aligns us closer to our primary market. India understands what Razorpay does, and it just makes logical sense for us to list on the market where people know us,” he said.
With India emerging as a global startup hub, the trend is set to accelerate. Sunil Khaitan, head of the financing group at Goldman Sachs India, expects this momentum to pick up in 2025, further strengthening India’s position as a key player in global entrepreneurship. As regulatory reforms continue and domestic investment options expand, the era of Indian startups incorporating overseas may soon be a thing of the past.
(With ToI inputs)
