PhonePe investors paid Rs 8,000 crore in capital gain taxes to relocate from Singapore to India, revealed firm's chief executive Sameer Nigam. In a conversation with PhonePe’s chief technology officer Rahul Chari on YouTube, Nigam said that challenges for startups shifting domicile to India were high.
Sameer Nigam said, “If you want to move from any other market to India as a domicile, it is treated as a capital gains event for existing investors so they have to make a fresh mark to market valuation, you have to pay tax on the delta.”
In October 2022, PhonePe announced that it had completed the process of moving its domicile from Singapore to India. "The mission we are on is to solve for at-scale financial inclusion, digitization, ecosystem building in the country…India is where we started and India is where we will focus going ahead," Nigam said.
Backed by Walmart Inc. and Tencent, PhonePe also stands to lose the chance to offset $900 million of accumulated losses against future profits. This is because tax authorities view the shift in domicile as a restructuring event.
“One thing that’s very common in startups in pre-profits. You are accumulating losses and later when companies become profitable you get to offset the losses to save some tax. By domiciling to India, we stand to lose about $900 million dollars of accumulated losses because this is treated as a restructuring event,” Nigam said.
Nigam said that at least 20 exisiting unicorns want to shift domicile to India if regulations get easier.
“This is very hard for many startups, especially in the early stages of growth. This is like disincentivizing startups for coming back to India,” Nigam said. Nigam said that the IPO will be decided only after achieving certain parameters.
“We said that we will list sometime in 2023, but a lot has changed. However, a lot of things have changed. Opportunities have grown, ONDC, Account aggregators and so many new markets have opened up….Profitability at scale will be the main parameter and diversification of the business. It will take us a few years,” he further said.
This comes as PhonePe raised $350 million from General Atlantic at a valuation of over $12 billion, making it the most-valued fintech in India. The company would be raising as much as $1 billion in the current round in tranches, PhonePe said in a statement on January 19.
PhonePe’s $350 million fundraising follows the company’s spin-off from e-commerce startup Flipkart. The Flipkart spin-off also completes PhonePe's transition to a fully Indian-domiciled company.