According to investment banking sources, several companies, particularly in the software-as-a-service (SaaS) ecosystem and those valued above $500 million, that were earlier eyeing domestic listings are now reassessing the timing and viability of such moves.
Over the past few years, a number of startups, including PhonePe, Meesho, Razorpay, Pine Labs, Udaan and KreditBee, have re-domiciled or initiated the reverse-flip process.
Earlier, Zepto, Groww, and Flipkart had shifted back to India. While Meesho and Groww have already listed on Indian exchanges, PhonePe, Flipkart and Zepto remain at various stages of preparation. Most of these flips have been from the US or Singapore.
“A lot of companies that were intuitively inclined to return, driven by the buoyancy in Indian public markets, have put plans on hold due to costs, income considerations and execution challenges,” said Sanjay Khan Nagra, partner at Khaitan & Co. He added that timelines often prove overly aggressive given the ancillary issues that must be resolved before restructuring.
The slowdown in India’s IT sector and deeper funding pools for artificial intelligence-focused startups in the US have further dampened enthusiasm. In 2025, Indian AI companies raised just $300 million across 98 rounds, compared with $122.5 billion raised by US firms in 849 rounds.
Over the past five years, India saw 969 AI startups founded, while the US recorded 4,092.
“Most firms that moved overseas are SaaS companies. Globally, SaaS has seen compression in price-earnings multiples and a broad selloff. Uncertainty around valuations and investor appetite for software is pushing startups into a wait-and-watch mode,” said Siddarth Pai, founding partner at 3one4 Capital. “The recent selloff in Indian IT stocks is also concerning, as it signals weaker investor appetite. Companies may prefer to rework their narratives and flip back later.”
Market participants also cautioned that India’s robust IPO pipeline could absorb significant capital in the near term, intensifying competition by the time late-stage startups complete their reverse flips and seek listings.
Ipsita Agarwalla, leader for international tax and investment funds at Nishith Desai Associates, pointed to practical hurdles, including restructuring employee incentive plans.
“There can be tax implications from cancelling and re-issuing stock options, as well as challenges in aligning ESOP structures with Indian law,” she said. Offshore investors, she added, are keen to preserve negotiated rights and assess how reverse flips may affect IPO exits.
“Where the parent company is US-based, exiting the offshore structure can involve significant tax costs at the US level. From an Indian tax perspective, while an inbound merger may be tax-neutral subject to conditions, accumulated tax losses of the Indian entity could be impacted due to changes in shareholding,” Agarwalla said.
Another expert noted that offshore investors are also grappling with tax uncertainty following notices issued to foreign portfolio investors after the Supreme Court’s Tiger Global ruling, further reinforcing the decision by startups to delay their India homecoming.
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