Pine Labs, a financial technology company, is set to relocate back to India, according to a report by TechCrunch. As per a recent regulatory filing, the company has received approval from a Singapore court to merge its Singapore entity with its Indian entity, effectively reverse-flipping the company back to its home turf. This move is set to help Pine Labs achieve cost savings, and simplify its shareholding structure. It is also expected to help the company “achieve business synergies and more economies of scale.”
With this, Pine Labs will join the list of fintech companies like Groww and PhonePe that have decided to shift their home base back to India. Of these two, PhonePe’s parent company Walmart had to pay nearly $1 billion in tax to the Indian government for shifting the startup’s headquarters from Singapore to India.
Speaking to the Economic Times in March this year, Minister of Commerce Piyush Goyal informed that Indian startups moving their domicile back to India will have to pay taxes. While it is unclear how much Groww and Pine Labs will have to pay, judging by the tax levied on PhonePe, it will be an expensive move.
Some context:
Companies shifting their domicile to other countries also termed as ‘flipping’ was flagged as a key concern by the Economic Survey conducted by the government in 2022-23. The survey stated that startups in India were struggling with elusive funding, revenue generation struggles, and wading through the regulatory environment and tax structures. As such, they choose to move their headquarters to countries with favorable legal environments and taxation policies.
The survey mentioned that the “growing maturity of India’s capital markets” has slowed down flipping, and incentivized companies to explore “reverse flipping” — shifting their domicile back to India. One of the suggestions it gave to encourage re-flipping was simplifying the “multiple layers of tax and uncertainty due to tax litigation.”
Why are companies moving back to India?
According to the Minister, startups were moving back to India expecting to get higher valuations by listing in India. Ola founder Bhavish Aggarwal has previously highlighted another reason for re-flipping, which is that companies domiciled in India get a significant portion of the funding that comes into Indian businesses.
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