E-commerce major Flipkart is looking to move its base back to India from Singapore. The Walmart-backed company, which started operating in 2007, is the largest Indian e-commerce firm to have a foreign domicile.

The development was first reported by The Economic Times on Monday. The report said that Flipkart, which would be valued at around $33 billion, has been holding discussions internally and the shift could be put into gear in the coming months.

So, why is Flipkart considering this and how does it help parent Walmart?

Domicile status: Before we get into why companies like Flipkart want to return to the country, let’s look at why they register abroad, especially Singapore, in the first place.

One reason is the affordable and flat taxation rate of 17%; there is no capital gains tax either. The country offers a partial tax exemption and a three-year start-up tax exemption for qualifying startups and some concessions to multinational companies. Singapore also has several tax treaties with many countries—an obvious advantage for companies incorporated there.

Two, the regulatory processes are fairly simple and there’s less bureaucracy. For companies carrying out businesses that involve more than one country, processes in Singapore make transactions and arbitrations fairly easy. It also helps that firms registered there generally follow tight documentation and agreements. In addition to that, the country has seen few political upheavals, has strong anti-corruption laws and robust intellectual property regulations. This makes it easy to access capital and funding for growth, especially from foreign-based entities.

Coming back to Flipkart. It was incorporated in Singapore in 2011 as a private limited company with the majority of its operations in Bengaluru. The shift made sense because the country’s tech ecosystem was in formative stages at the time.

While the latest development—the plan to return to India—largely stems from Flipkart’s plans for an initial public offering, the company joins a growing list of businesses incorporated abroad that have either moved their domicile back to India or are mulling such a shift. Razorpay, Eruditus, Zepto and Groww are some examples that come to mind.

This reverse flipping comes amid several factors. One of them is that companies, especially in the tech sector, are experiencing a funding winter globally. Meanwhile, in India, the markets are booming. The most plausible explanation is that these companies are unable to raise funds abroad—a primary reason for the shift—and are now looking to tap Indian markets. For more on the homecoming of Indian startups, read our earlier story.

It’s also worth noting here that in 2021, when the COVID-19 pandemic was still raging, India’s market regulator allowed loss-making startups to list on exchanges. A lot of companies ended up listing on the bourses as a result, many with sky-high valuations. That year saw 63 IPOs raising Rs 1,18,723 crore.

IPO and timing: Indian markets’ bull run has continued ever since. And it seems Flipkart too wants to cash in on this. The ET report, citing insiders, said that while Flipkart does not plan on an IPO this year, it is making the move as “recent consumer company IPOs have shown the appetite for large consumer businesses on domestic bourses, and the consideration to move its holding company to India is part of that. Flipkart has been sharpening its strategies to get to profitability”.

This is not the first time Flipkart’s potential listing has come up. Walmart, which owns a 77% stake in the company, has been saying that Flipkart’s IPO is among its long-term ambitions for a while now.

According to a Business Standard report, Flipkart is looking to list sometime between 2025 and 2026, and has intensified efforts to achieve profitability as it eyes a valuation of $60 billion—nearly 2x its current valuation. Its move is also well timed. Electronic retailing is poised to become among the fastest-growing sectors and reach a market size of over $300 billion by the end of this decade, propelled by greater consumption and connectivity in tier-2 and tier-3 cities.

But there could be more to Flipkart’s move than just tapping into market dynamics. On the face of it, having an Indian address for the incorporated entity could be a great posturing exercise for Flipkart before its listing in the country. To be IPO-ready would then mean not only improving financial performance and corporate governance, but also creating an image that promotes its “Indian-ness” for the upcoming listing. This could also help ease any future regulatory issues it may run into in the country.

Simply put, being headquartered in India could be a great look for Flipkart ahead of its listing.

“In retail, what is international and what is Indian is still a grey area. There has been so much back and forth in policymaking, you can't tell what will change tomorrow and what won’t,” says Ankur Bisen, senior partner and head of consumer, food and retail at Technopak Advisors. “A listed entity here though is as domestic as it gets. That changes the game completely because you are on the right side of policy debate. What is Indian and what is not matters a lot in the power corridors.”

But the process won’t be easy for Flipkart. Not only will the exercise be fairly complicated and laborious because of multiple verticals and entities that Flipkart houses but it will also result in significant tax bills for its US-based parent. When PhonePe, for example, separated from Flipkart and shifted base from Singapore to India, Walmart had to pay nearly $1 billion in taxes to the government. For Flipkart, the tax bills will be much larger. The only hope for Walmart and Flipkart, then, would be a blockbuster listing where some of these bills could be recouped.

It’s safe to assume that Walmart must have done the math and is shifting base because it makes sense to do so in the long run. As for Flipkart, the optics could really help its chances on D-Street.

With inputs from Harveen Ahluwalia

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Image: Freepik/ Rochak Shukla