Razorpay, a leading Indian fintech company, has officially completed its “reverse flip,” relocating its parent company’s domicile from the United States back to India. This strategic move designates India as the company’s global headquarters and is part of a broader trend among Indian startups returning home to capitalize on favorable regulatory conditions and a booming IPO market.
Significant Tax Implications of the Reverse Flip
As part of this redomiciling process, Razorpay is expected to incur a substantial tax liability of approximately $150 million (around ₹1,245 crore). This tax obligation arises due to capital gains taxes associated with the transfer of assets and shares from the U.S. entity to the Indian entity.
The tax liability is determined based on the company’s valuation and assessments from third-party audits. Razorpay was valued at $7.5 billion during its last funding round in December 2021.
Importantly, Razorpay plans to settle this tax liability using its internal cash reserves, without seeking additional funding.
Regulatory Approvals and Streamlined Process
The reverse flip was carried out under revised regulatory norms in India, which allow companies to bypass the National Company Law Tribunal (NCLT), thereby streamlining the process. Razorpay obtained necessary approvals from the Reserve Bank of India (RBI) and the Ministry of Corporate Affairs (MCA) to complete the merger of its U.S.-based entity with its Indian subsidiary, Razorpay Software Pvt Ltd. Moneycontrol
This regulatory reform has significantly reduced the time required for such domicile shifts, encouraging more Indian startups to consider returning to India.
Future Plans: IPO and Business Growth
Razorpay has indicated plans to go public within the next 18 to 24 months. The company has already restructured itself into a public limited company, a crucial step toward its anticipated initial public offering (IPO).
In the fiscal year 2024, Razorpay reported a revenue of ₹2,501 crore and a profit after tax of ₹35 crore, reflecting a 24% growth in revenue. The company continues to expand its product offerings and customer base, positioning itself for sustained growth in the Indian fintech sector.
Conclusion
Razorpay’s reverse flip to India, accompanied by a significant tax payment, underscores the company’s commitment to aligning its operations with India’s regulatory framework and capitalizing on the country’s robust financial ecosystem. This move not only reflects Razorpay’s confidence in India’s economic future but also sets the stage for its upcoming IPO and continued growth in the fintech industry.
