War slows IPOs, but startups keep bringing headquarters home

Even as several IPO-bound technology companies reassess launch timelines amid the war in West Asia, one critical element of their listing preparation—shifting their corporate domicile back to India—remains largely unaffected.Mint’s analysis of EY data shows that nearly 20 Indian tech startups have either shifted, are in the process of shifting, or are considering shifting their headquarters back to India ahead of planned listings. Of these, 13 companies have already completed the restructuring or are in the process of it, signalling that the trend is becoming a structural feature of India’s new-age tech IPO pipeline.These companies were founded in India but chose Singapore or US holding structures to tap global capital, regulatory flexibility and overseas listing, according to experts.Prominent startups, including Flipkart, PhonePe, Razorpay and Zepto, have already shifted their holding companies back to India from Singapore and the US ahead of their listings.There are some tax implications for companies shifting back, as they may lose the ability to ‘carry forward’ previous years' business losses to offset future taxable profits, according to tax experts.Further, capital gains tax on existing investors applies if the shift is made via a share swap, in which foreign shareholders exchange their shares for shares in the Indian entity.

For instance, PhonePe's investors, led by Walmart, reportedly paid ₹8,000 crore in taxes to complete its 2022 relocation. Tax liabilities are typically funded through internal accruals.“None of the companies’ plans for flipping their domicile are changing, despite the current geopolitical scenario.