The two join several other well-funded and highly valued startups that are moving their overseas holding companies to India — or ‘reverse flipping’ — ahead of listings, especially in the central bank-regulated fintech sector.
The $5-billion Pine Labs began work on its IPO plans late in 2021, but postponed it citing volatile market conditions. “The firm will make the necessary filings for flipping its parent company back to India after board approval,” said a person briefed on the plans.
ETtechMeesho yet to take a call
The person cited above added that closing the Pine Labs flip, which is due to begin this year, “will depend on regulatory approvals.”
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Another person aware of the discussions at Udaan said the firm is inclined to move its holding company to India while keeping options open for an overseas listing through a Singapore entity.
The nearly $5-billion Meesho, whose parent firm is based in the US, has also been deliberating multiple options for reverse flipping to India, though it is yet to come to a decision, the people said.
Pine Labs and Udaan declined to comment on the matter, while an email sent to Meesho did not elicit a response till time of going to press.
Also read | Pine Labs FY23 revenue surges 56% to Rs 1,588 crore, losses dip marginally
Reasons & Ramifications
Several industry executives told ET there is more urgency from fintech companies to move base to India amid a tightening regulatory environment. Several startups that are large firms now had set up overseas bases for easier funding, as well as tax policies. Over the past few years, the Centre has been working on new guidelines for improving regulation.
For others, the flip is linked to a potential IPO, as well as operating from the home market.
The person cited above said that at Udaan, “there is a view… to do the IPO in India, and for that, it would be better to flip the holding company here.”
“India as a market for an IPO (will) make sense (even) after a year or so, even as it (the company) works on cutting costs further and turning profitable,” the person added, referring to Udaan’s December layoffs after a $340-million financing, largely through debt-to-equity conversion.
A top tier tech startup moving its holding company back to India may also entail a tax gain for the Indian government, depending on the modalities, according to executives. When Walmart-backed PhonePe completed its migration from Singapore to India in 2023, the process resulted in nearly $1 billion tax gains for the Indian government, paid by Walmart.
Also read | Meesho’s early backers eye new secondaries at $3-3.5 billion valuation
At the Crossroads
Those aware of Meesho’s plans said the ecommerce firm “is contemplating what would be the best option, given that it is an ecommerce firm and not a regulated entity like its fellow Y Combinator-backed companies Razorpay and Groww,” said one person.
Meesho’s India entity is Fashnear Technologies, while its parent in the US is Meesho Inc.
The two most typical ways for startups to flip back are share swaps and inbound mergers.
When shareholders of the overseas entity swap their shares with those of the Indian entity, both foreign and Indian shareholders have holdings in the domestic company. However, in an inbound (cross-)border merger, the foreign company ceases to exist, lawyers told ET.
ET reported first in May 2023 on online payments firm Razorpay evaluating flipping back to India. In November, ET reported that stockbroking major Groww has begun work on changing its domicile.
Both have opted for a cross-country merger between the US holding company and the India unit, with Groww already having applied for clearance from the National Company Law Tribunal.
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