PhonePe’s investors paid a very expensive price to move to India, according to the company’s chief executive Sameer Nigam, who also claimed that the choice to leave Singapore and move to India cost investors a “shocking” 8,000 crore in capital gains taxes.
“If you want to move domicile from any other market to India, it’s treated as a capital gains event…So, you have to make a fresh market valuation and have to pay tax on the delta,” Nigam told PhonePe’s chief technology officer Rahul Chari in a YouTube conversation.
Due to the fact that local tax authorities consider the change in domicile to be a restructuring event, Walmart Inc. and Tencent-backed PhonePe may also forfeit the opportunity to use $900 million in cumulative losses against future earnings.
Additionally, Nigam stated that employees’ employee stock option (Esop) vesting periods will restart in accordance with Indian legislation. “The law in India says if you migrate the Esop plan, you have to start again with a new one-year cliff,” said Nigam. In addition, it might be challenging for companies, especially those in the early stages, to persuade staff members about the longer vesting time in India.
In order to develop shareholder and ecosystem value locally, the firm moved its domicile to India in October, according to Nigam. He said that PhonePe was only able to weather the “shock” despite being a maturing business because its “investors have a multi-decade vision”.
Nigam further emphasized that after PhonePe’s change of domicile, close to 20 unicorn businesses and their investors contacted him with the intention of returning to India. However, Nigam withheld the names of the companies. Following PhonePe’s change of residence, the unicorn FinTech company raised $350 million from private equity firm General Atlantic, valued at $12 billion. Tiger Global and other investors are expected to contribute up to $1 billion to the round that handed it the title of India’s most valuable FinTech.
The business announced in October that it intended to go public in 2023. However, a lot has changed since then. For instance, in December, PhonePe and Flipkart parted ways. In 2016, the latter company bought PhonePe. Nigam stated that for the domicile change, the board, shareholders, and PhonePe’s largest stakeholder, Flipkart, all needed to be in agreement. He continued by saying that PhonePe’s separation from Flipkart will enable it to realize greater value and “provide the firm with the opportunity to bring additional investors more in line with its business”.
When enquired about the precise timetable for the IPO, Nigam remained vague.