PhonePe Reverse Flip to India: Unraveling the Strategic Shift and its Impact

21 August 2023

The Reverse Flip

What is Reverse Flip?

"Reverse flip" or "redomiciliation" refers to a corporate restructuring process in which a company changes its country of domicile or legal registration from one jurisdiction to another.


  • PhonePe was incorporated in 2015 in India
  • In April 2016, PhonePe was acquired by Flipkart. As part of the acquisition, PhonePe flipped its structure to Singapore
  • In 2018, PhonePe became a part of Walmart after it acquired Flipkart
  • In October 2022, PhonePe announced that it has moved its domicile to India (reverse flip) for following key reasons:

    • PhonePe wants to focus on India markets for the next couple of decades. PhonePe is a digital payments company that operates primarily in India. By redomiciling to India, PhonePe can be more responsive to the needs of its customers and partners.
    • The Indian government has been tightening regulations for digital payments companies in recent years. By redomiciling to India, PhonePe can be more easily compliant with these regulations.
    • To be better positioned for an IPO. PhonePe is expected to go public in the next few years

What Happened?

Steps undertaken

  • PhonePe moved all businesses and subsidiaries of PhonePe Singapore to PhonePe India directly
  • PhonePe created a new ESOP plan at India level and migrated all group employees to this new plan
  • IndusOS, owned by PhonePe, also shifted operations from Singapore to PhonePe India

Key Consequences of Reverse Flip to India

  • Lapse of accumulated losses of USD 900 million

    • PhonePe stands to lose the chance to offset its USD 900 million (~INR 7,380 crore) of accumulated losses against future profits as shifting the domicile from Singapore to India is viewed as a restricting event under Section 79 of the Income Tax Act, 1961
    • As per the provisions of Section 79, a company is not allowed to carry forward the losses if the change in beneficial ownership of shareholding of more than 50% occurred at the end of year in which losses were incurred

  • Reset of ESOPs to zero vesting with 1 year cliff

    • All employees of PhonePe were migrated to the new India level ESOP plan which stipulates a minimum 1 year cliff.
    • Thus, the employees vesting status was reset to zero with a 1 year cliff

  • Tax payout by investors of almost INR 8,000 cr

    • PhonePe investors, led by Walmart, sold their stake in the Singapore entity and invested in PhonePe India
    • This means that there was a capital gains tax event in India for the the investors leading to a tax-pay-out of almost INR 8,000 cr

Other Startups looking at Reverse Flip

  • Razorpay is in process to move its parent entity from the US to India
  • Groww is planning to move its domicile from the US to India
  • Pepperfry has reverse flipped their structure to India via amalgamation


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