Flipkart, a major player in e-commerce, is in talks to relocate its parent entity from Singapore to India, as reported by ET.
Valued at around $33 billion, Flipkart, one of India’s leading technology startups, potentially coming back to India signifies the growing trend of reverse flipping. This trend is underscored by Walmart-owned PhonePe also relocating its headquarters to India.
Flipkart Pvt Ltd, the parent company, presently operates from Singapore, akin to PhonePe’s previous setup before shifting its base to India in October 2022.
Regarding PhonePe, the company, valued at nearly $10 billion in 2022, relocated to India and reportedly expended over $900 million to register its parent entity there. Flipkart is also anticipated to face a substantial reverse flipping tax.
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As per the ET report, Flipkart’s senior leadership has internally deliberated relocating the parent entity to India, with plans for the move anticipated to gain momentum in the coming months.
Nevertheless, implementing this transition could present challenges given Flipkart’s vast scale and the involvement of multiple entities managing its e-commerce operations in India.
The decision to relocate to India is linked to Flipkart’s overarching goal of pursuing an initial public offering (IPO) in the long run. Although Flipkart isn’t currently planning an IPO for 2024, the recent prosperous IPOs of consumer companies underscore the market’s interest in large-scale consumer businesses listed on domestic stock exchanges.
Nonetheless, market confidence hinges on profitability, an area where Flipkart has a significant gap to bridge.
In the fiscal year that ended on March 31, 2023, Flipkart Internet Private Limited, the B2C division of Walmart-owned Flipkart, recorded an operating revenue of nearly INR 15,000 Crores. During the financial year 2022-23 (FY23), the marketplace arm experienced a notable surge in operating revenue, increasing by 42% to INR 14,845.8 Crores from INR 10,477.4 Crores in FY22.
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During the period under review, the company successfully decreased its cash burn, resulting in a 9% reduction in net loss to INR 4,026.5 Crores compared to INR 4,419.5 Crores in FY22.
However, Flipkart’s B2B arm saw its net loss increase by over 42% to INR 4,845.7 Crores in FY23, compared to INR 3,404.3 Crores in the previous fiscal year.
Flipkart is reportedly refining its product and cost strategies in pursuit of profitability. The company has expanded into the fintech category, offering digital lending and UPI payments.
In January 2024, the company reportedly initiated a process to streamline its workforce, potentially resulting in a reduction of its total team size by 5-7%. The workforce reduction was finalized last month and is part of the ongoing performance review.
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Recently, fintech unicorn Groww completed its reverse flip by relocating its domicile from the US to India.
Following PhonePe, Groww became the second major startup to relocate its domicile to India. Several other Indian startups, such as Zepto, Razorpay, and Pine Labs, are also considering reverse flipping, with many aiming for IPOs in India.
Furthermore, for fintech startups like PhonePe or Razorpay, having an Indian parent entity is advantageous from a regulatory perspective.