The ₹8,000 crore homecoming
A few years ago, the smart move for an ambitious Indian startup chasing global capital was to "flip" — set up a holding company in Delaware or Singapore, tuck the Indian company underneath it as a subsidiary, and raise from US and international investors on paperwork they were comfortable with. It was cheap and easy to do when the company was small. Then India's public markets matured, a domestic listing started to look more attractive than a foreign one, and a wave of the country's biggest names — PhonePe, Groww, Razorpay, Zepto, Flipkart, Meesho — decided to bring the parent company back home. That is the "reverse flip." And it turned out to be anything but cheap: PhonePe's move reportedly carried a tax liability in the region of ₹8,000 crore and the loss of nearly a billion dollars of accumulated losses; Groww's Delaware-to-India shift reportedly cost around ₹1,340 crore in tax. The structure you pick when you are tiny can cost a fortune to undo once you are a unicorn. Here is what flipping and reverse-flipping actually are, why the direction of travel has reversed, the two routes home, and the tax bill that decides whether it is worth it.
What a "flip" is, and why founders did it
A flip is a restructuring that puts a foreign holding company on top of the Indian business. The founders and investors incorporate a company abroad — most commonly in Delaware (USA), Singapore or the Cayman Islands — and then swap their shares in the Indian company for shares in that foreign parent, so the Indian operating company becomes a wholly-owned subsidiary of the offshore holdco. For a decade this was the default for startups with global ambitions, and the reasons were practical: US and international venture funds preferred to invest into a Delaware entity on instruments and documents they knew inside out (the SAFE, for instance, is a US construct), the offshore structure made a future US listing or trade sale simpler, and it sidestepped some of the friction of Indian foreign-investment paperwork. The mirror image of this arrangement — a foreign company running an Indian arm — is the ordinary foreign subsidiary structure; a flip is simply a founder-led version created by moving the holding company offshore after the fact.
Why they are now reversing it — the reverse flip
A reverse flip (sometimes called internalisation) is the flip run backwards: the foreign holding company is collapsed back into the Indian company, so the Indian entity becomes the parent again and the offshore layer disappears. The pull factors have flipped along with the structure. The single biggest driver is the Indian IPO — the domestic public markets have deepened enormously, valuations for consumer-internet businesses are strong, and a company that wants to list in India generally needs its holding company to be in India. On top of that: growing investor confidence in the Indian ecosystem, the cost and complexity of maintaining an offshore parent that no longer serves a purpose, closer alignment between where the company is legally domiciled and where it actually operates, and a friendlier regulatory stance from Indian authorities actively trying to win these companies back. The result has been a steady stream of high-profile homecomings, and each successful one makes the next founder's decision easier.
The two routes home
Bringing the holding company back is done one of two ways. The first is an inbound cross-border merger — the foreign holdco is legally merged into the Indian company under Section 234 of the Companies Act, 2013 (read with Sections 230 to 232 and Rule 25A of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016). On the foreign-exchange side, the Foreign Exchange Management (Cross Border Merger) Regulations, 2018 provide a deemed approval from the RBI where the scheme meets the prescribed conditions, which removes a major approval that used to slow these deals down. The second route is a share swap — shareholders of the foreign holdco exchange their shares for shares in the Indian company — which was made cleaner by the August 2024 amendments to the Non-Debt Instruments (NDI) Rules aligning them with the Overseas Investment framework. Which route fits depends on the company's cap table, its investors' tax positions, and where its ESOP holders sit; there is no single right answer, only the one that is cleanest for a given structure.
The 2024-2025 fast-track that changed the maths
What genuinely shifted the calculus was a procedural reform. In September 2024, the government amended Rule 25A to open a fast-track route for the inbound merger of a foreign holding company into its wholly-owned Indian subsidiary — meaning such a reverse-flip merger can be approved by the Regional Director under the Section 233 fast-track process instead of running the full, lengthy National Company Law Tribunal route. That cut both time and cost substantially. The Union Budget 2025-26 pushed further, widening the categories eligible for fast-track mergers to include, among others, a holding company and its wholly-owned subsidiary and startup companies. Razorpay's reverse flip, completed in May 2025, is reported as the first successful US-to-India reverse flip executed under the amended fast-track mechanism — a signal that the route now works in practice, not just on paper.
The catch nobody escapes: the tax bill
The reform made reverse flips faster; it did not make them free. Collapsing an offshore holding company is, in tax terms, a significant event. Where the shares of the foreign holdco derive their value substantially from assets located in India, a transfer of those shares can be caught by India's indirect-transfer provisions and taxed as capital gains in the shareholders' hands — subject to relief under any applicable Double Taxation Avoidance Agreement, which is why the investors' jurisdictions matter so much to the final bill. Accumulated tax losses sitting in the foreign entity can also be lost in the process. This is exactly what made the headline homecomings so expensive — the roughly ₹8,000 crore tax exposure reported for PhonePe and the roughly ₹1,340 crore for Groww are the real-world scale of it. The lesson for a founder standing at the start of this is blunt: flipping out is cheap when the company is worth little; flipping back is enormously expensive once it is worth a lot. The structuring decision you make at seed stage has a price tag that grows with your valuation.
Where this sits in the startup journey
The flip decision touches almost everything else a founder builds. It reshapes the cap table — every shareholder's holding moves from one entity to another — and it interacts with the instruments in your last round, since the SAFEs and convertibles foreign investors used were often the reason to flip in the first place. Any foreign money that came in has to have been reported correctly under FEMA and FC-GPR for the restructuring to be clean, and the whole thing runs on the term sheet and shareholders' agreement terms your investors negotiated. Because it is really a question of where your company should be domiciled as it scales, it belongs in the wider picture set out in the Startup India guide. Get the structure right early and you keep your options open cheaply; get it wrong and you pay to fix it at the worst possible time — right before a listing.
How we handle it at RDA, Baner
At RDA Advisory, Baner, we help founders think about domicile before it becomes a costly problem. For companies considering a flip, we model what an offshore holding structure actually buys against what it will cost to unwind later, so the decision is made with the tax bill in view rather than discovered years afterwards. For companies coming home, we scope the reverse flip end to end — choosing between an inbound cross-border merger and a share swap, mapping the Section 234, Rule 25A and RBI cross-border-merger requirements, working the fast-track route where the company qualifies, coordinating with counsel on the NCLT or Regional Director filing, and modelling the capital-gains and indirect-transfer exposure across your investors' jurisdictions and any DTAA relief. Office No. 102, Snehraj Apartment, Baner, Pune 411045 · call +91 77570 45059.
Considering a flip, or planning to bring your holdco home? Model the cost first
Weighing a foreign holding structure, or planning a reverse flip before an Indian listing? RDA models the tax and regulatory cost of both directions, picks the cleanest route home (cross-border merger or share swap), maps the Section 234, Rule 25A, RBI and fast-track requirements, and works the capital-gains exposure across jurisdictions — so domicile is a deliberate choice, not an expensive surprise. Book a consult at rdatax.in or call +91 77570 45059, or see our company registration & startup advisory service. RDA Advisory, Baner, Pune.
Verification note: A "flip" places a foreign holding company (commonly incorporated in Delaware, Singapore or the Cayman Islands) over an Indian company, which becomes its wholly-owned subsidiary; a "reverse flip" (internalisation) brings that holding company back to India. A reverse flip is typically effected either by an inbound cross-border merger of the foreign company into the Indian company under Section 234 of the Companies Act, 2013 (read with Sections 230–232 and Rule 25A of the Companies (Compromises, Arrangements and Amalgamations) Rules, 2016), with deemed RBI approval available under the Foreign Exchange Management (Cross Border Merger) Regulations, 2018 where prescribed conditions are met, or by a share swap under the Non-Debt Instruments Rules as aligned with the Overseas Investment framework (amended August 2024). A September 2024 amendment to Rule 25A introduced a fast-track route (approval by the Regional Director under Section 233) for the merger of a foreign holding company into its wholly-owned Indian subsidiary, and the Union Budget 2025-26 widened fast-track merger eligibility. Transfers of foreign holding-company shares deriving value substantially from Indian assets may be taxable as capital gains under India's indirect-transfer provisions, subject to applicable Double Taxation Avoidance Agreement relief. The tax figures cited for individual companies (including PhonePe and Groww) are drawn from public reporting and are illustrative of scale, not precise assessments. Company-law provisions, FEMA regulations, tax rules, forms, timelines and eligibility conditions are periodically amended and the position is highly fact-specific, so obtain professional legal and tax advice before undertaking any flip or reverse flip. This is general information, not legal, tax or professional advice.
