Indian Startups: Indian Startups Return Home Amid Market Boom

Mumbai: It’s a homecoming for desi startups. An increasing number of Indian-origin companies are doing ‘reverse pivot’ – moving their headquarters back to India from abroad due to attractive stock market valuations and to avoid problems on the regulatory front. While fintech players PhonePe, Groww and Pine Labs have turned away, other startups like Razorpay, Meesho, Udaan and Zepto are working on shifting base to India. The local equity market’s rich multiples make India an attractive place for an IPO compared to the US IPO. “Zomato’s listing showed that the Indian stock exchange rewards new-age internet companies with high valuations. While there is significant software activity in the US market, a comparable number of software companies have not yet entered the Indian market. This untapped demand is attractive for Indian startups,” said Siddharth Pai, founding partner of 3one4 Capital and co-chairman of the Private Equity and Venture Capital Association of India (Regulatory Affairs). According to Pai, the names of these companies are widely known and many Indian retail investors are eager to participate in their development. Listing on the US stock exchange would deprive Indian investors of this opportunity. India’s stock market listings overtook Hong Kong last year, and the momentum is expected to continue this year. The following companies are preparing to debut on the Indian stock exchange: Ola Electric, Swiggy, FirstCry. The regulations prevent foreign-registered companies from listing IPOs in India, securing NBFCs, payment licenses from the RBI and exporting certain types of data (e.g. view, payment information) from here. Over the past few years, India has introduced new laws to make consumer internet and e-commerce companies more accountable to local regulators. The Information Technology (Intermediary Guidelines and Digital Media Code of Ethics) rules require “significant social media intermediaries” to have a Chief Compliance Officer and Nodal Director in India, necessitating a physical presence and increased accountability to Indian courts and the government . Similarly, in the geospatial sector, the government has restricted the collection, processing and storage of street view data to Indian-controlled companies. The RBI has also implemented data localization regulations to ensure that payment data collected by payment systems remains in India. “These regulations contribute significantly to a company’s decision to relocate its headquarters back to India, especially if a significant portion of its target consumers are in India. Investors also want to protect their interests in the intellectual property and data collected by these ventures,” said Aasish Somasi, associate partner at SNG Partners. Digital payments company PhonePe, owned by US retailer Walmart, moved to India in 2022 from Singapore. Financial services company Groww took a similar approach by moving from the US to India in March 2024. Edtech company Eruditus is preparing to move its headquarters from Singapore to India for a stock exchange listing. Many startups originating from India have registered their holding companies in Singapore, the US and Dubai to facilitate access to foreign capital and tax incentives. “Foreign investors have also preferred setting up startups outside India due to legal convenience in enforcing contracts and ease of exit,” said Bhavin Shah, private equity leader at PwC India. Another factor that drove startups abroad was access to high-paying customers in the U.S. and Europe who perceive services from these regions as high quality. “For many data-driven startups serving such customers, the United States is the gateway to European customers. The EU-US data protection framework enables US-based companies to serve EU customers without the stringent privacy regulations imposed by the General Data Protection Regulation (GDPR) on companies based elsewhere, including India, said SNG Partners’ Somasi.