Reverse flipping: why Indian startups are moving their parent company home

What flipping means

In a flip, founders and investors swap their shares in the Indian company for shares in a new foreign holding company. The Indian company becomes a wholly owned subsidiary, and later rounds are raised by the foreign parent. A significant number of Indian startups backed by overseas investors were set up this way.

Why startups flipped

The reasons commonly given were:

• Access to foreign investors, many of whom preferred a familiar legal system and simpler rules on investing.
• Deeper capital markets and the hope of a listing abroad.
• Holding intellectual property outside India, sometimes at investors' request.
• Being close to customers: the US for software, Singapore for South-East Asia.
• Indian rules that were seen as harder to work with at the time, such as angel tax and foreign-exchange restrictions.

Why many are reversing

Indian stock markets have become a realistic place for new-economy companies to list, and listing there generally requires an Indian company. Rules have also eased: angel tax stopped applying from April 2025, and a faster merger route for reverse flips opened in 2024.

Several well-known startups, including PhonePe, Groww, Razorpay and Zepto, have completed moves of their parent company to India, and others have announced plans to follow.

How a reverse flip is done

There are two common routes, and the right one depends on the structure, the shareholders and the countries involved.

Since 17 September 2024, a foreign holding company merging into its wholly owned Indian subsidiary can use the fast-track merger process, applying to the central government rather than the National Company Law Tribunal, provided both companies first get RBI approval. The foreign country's own corporate and court approvals are needed as well.

The tax cost for shareholders

Tax is often the largest cost. A merger that meets Indian tax law's conditions for an amalgamation can be tax-neutral in India. A share swap is treated as an exchange, so shareholders can owe capital gains tax, and non-residents can be taxed in India under the indirect transfer rules where the foreign shares derive their value from Indian assets, subject to tax treaties. Shareholders' home countries may tax the exchange even where India does not, so US and other foreign holders need their own advice.

Illustrative example: an investor paid ₹2 crore for shares in the foreign parent, and they are worth ₹10 crore at the time of a share swap. If the swap is taxable, the ₹8 crore gain can attract tax even though the investor receives only shares, not cash, so the tax has to be paid from other money.

A change in shareholding can also affect the Indian company's carried-forward tax losses, and stock options over the foreign parent's shares need to be replaced or converted. The rules change and the analysis is specific to each company, so get tax and legal advice in every country involved before committing.

Planning a reverse flip

• Map the cap table by each shareholder's country and tax position before choosing a route.
• Get valuations done early; FEMA requires them for issues to non-residents and for swaps.
• Allow time for approvals in two countries, valuations and tax analysis.
• Plan employee stock options, contracts and intellectual property transfers alongside the corporate steps.