From Foreign Shores to Home Waters: India's IPO Renaissance and the Strategic Imperative of Reverse Flipping Under the 2025 SEBI ICDR Regulatory Revolution

A. From Bottlenecks to Breakthroughs: A Comparative Analysis of India’s IPO Reforms

The Indian startup ecosystem has come a long way over the past ten years, but regulatory challenges were always a hindrance to IPO plans, particularly for firms with overseas structures. The much-awaited reform of the 2025 SEBI ICDR Regulations[i] transformation signals a move away from an antiquated, promoter-centric IPO regime to the modern, institutional-friendly, and technology-savvy regime.

Liquidity and Exit: From One-Year Lock-in to Immediate Monetization

The earlier regime required that equity shares issued through the Offer-for-Sale (OFS) method in the context of IPOs be held by SEBI for a term of at least one year prior to any such offer. More importantly, the equity arising out of the conversion of fully paid Compulsorily Convertible Securities (CCS) was not within the exemption provided to shares issued in accordance with schemes approved by the court or tribunal, making it difficult for early as well as institutional investors, holding convertible preference shares or debentures at the offshore parent level, to find liquidity at the IPO.[ii]

The 2025 amendment, specifically regulations 8 and 105, classifies CCS-conversion [iii] category on par with the direct allocation of equity under the schemes that are approved. They have been exempt from the holding period requirement, thereby removing the long-awaited obstacle to the widened timeline under the OFS. The clarification provided by the amendment regarding the holding period states that the holding period covers the time the shares were held under the CCS scheme and the equity shares that were obtained after conversion, thereby making the entire holding period, until the conversion, eligible for the 1-year requirement if the conversion took place before the filing of the DRHP.[iv] This is not only increasing the liquidity on the secondary market after the IPO but is also restoring market faith and making Indian market practices consistent with international best practices regarding market liquidity.[v]

Founder ESOPs: From Forfeiture to Retention

Earlier, promoters who became so classified had to relinquish ESOPs allotted to them prior to reaching promoter classification and before submitting the Draft Red Herring Prospectus (DRHP). This weakened entrepreneurial motivations and destabilized leadership at a key IPO-prep juncture.[vi] Now, under Regulation 9(6) of the SEBI (Share Based Employee Benefits and Sweat Equity) Regulations, 2021 [vii]founders can hold onto ESOPs awarded at least a year prior to DRHP filing, encouraging long-term dedication and bolstering the motivational framework for startups. This policy change aligns founder incentives more closely with company performance and eliminates a talent-retention deterrent that occurs upon IPO preparedness.[viii] This amendment would protect long-term incentives of genuine founder contributors while closing loopholes for last-minute share-based benefit manipulations.[ix]

Operational Challenges

IPO-listed firms earlier encountered a labyrinth of regulatory clearances, from SEBI, RBI, NCLT, sector regulators, and sometimes foreign regulators, with no window to harmonize reverse flip, merger, and IPO timelines. The reverse flipping phase, vital for firms that had outsourced, used to take 12-18 months and was beset by tax outcome uncertainty, most importantly, whether inbound mergers or share-swaps were exempt under the Income-tax Act. Absent exemption, capital-gains exposures could upset transaction economics.[x]

The reforms bring cost-saving and operational ease. Interestingly, reverse flips can now be executed within 3–4 months, as the March 2025 transaction of Dream11 shows.[xi] Further, the obligation to deposit 1% of the issue size with stock exchanges prior to listing has been done away with, saving pre-IPO capital burden.[xii] The requirement that promoters maintain a holding of 20% for three years after the IPO too has been abandoned, helping founder less companies and private equity-backed companies.[xiii]

Dematerialisation and Digital Enablement: From Complexity to Clarity

The pre-IPO shares may have had their origins in old offshore structures, involving more than one class of shares and more than one share custodian. The current regulation regarding the dematerialization of all pre-IPO shares makes this more straightforward, makes it simpler to understand all the operations and risk factors. The use of SEBI templates for the DRHP and the use of AI to review IPO documents clearly shows focus on coherent regulation. [xiv]

Externalization Pressures: Global Aspirations to Tax Risks

In the past few years, there had been many Indian startups that have externally moved their control or ownership to foreign countries in order to take advantage of the global capital market access, talent, and tax treatment advantages. According to an article, "Although these firms primarily conducted business in the Indian economy, they chose to register their operations in foreign countries such as the United States or Singapore." However, the trend of externalization of control or ownership experienced its challenges in terms of peaks in operation costs and even the possibility that the foreign firms could be considered controlled from the Indian economy with serious tax implications.. [xv] Despite this improvement, however, challenges remain. Institutional investors are now able to meet the MPC requirements but are required to comply with complex disclosure and lock-in agreements that may impact deal timing. Dematerialisation is a constraint when it is mandatory and applies to companies which have multi-jurisdictional past issuances.

Secondly, there are selling pressures arising from the increased OFS exemption, and price stability might be affected particularly for a retail-dominated IPO market where retail and HNI investors usually subscribe to 35%. Although flexibility has increased, risk management for volatility must be done with utmost care.[xvi] More importantly, taxation treatment remains uncertain for inbound share swap and mergers. The indirect transfer provisions under Income-tax Act tax foreign transfers for shares where considerable value comes from assets situated in India. Press Note 3[xvii] still regulates investors from neighbouring countries and may extend the time for approval for tabling capital.[xviii] Finally, dual listing facility, as practiced in India, means companies cannot list at home and foreign exchanges such as NASDAQ or LSE. Although there is a substitute for dual listing at the India International Exchange at GIFT City, it remains nascent with low turnover and liquid with poor participation.”[xix]

[Image Sources: Shutterstock]

B. Singapore’s Scheme of Arrangement

Singapore has a established Scheme of Arrangement in place, which is enforced by courts through the Companies Act 1967 (Sections 210 and 212)[xx], to facilitate cross-border mergers deals with a high degree of legally assured conclusiveness, tax efficiency, and investor protection.  This is done in a structured process of:

1. First of all, the Singaporean party requires the High Court to gather the shareholders for their meetings. There are meticulous reports on the details of the schemes of the merger.

2. The plan has to be approved by a super-majority, 75% of the shareholders’ support, which imbues the plan with formal legal rights and acceptability from the investors, especially critical for startups who have complex capital structures.

3. Legal and financial factors have to undergo due diligence to ensure it is compliant with Singaporean and Indian law, particularly those involving offshore ownership or liability.

4. Final Court Sanctioning & Implementation: After the scheme is determined as commercial and viable, it is sanctioned, thus registered in the ACRA of Singapore, within seven days.. Strikingly, the Singapore entity is wound up without being formally wound up, which enhances procedural efficiency. In an interesting aspect, the Singapore entity is wound up without formal winding-up, enhancing procedural efficiency.[xxi]

   
   

India's Regulatory Landscape

It stands in contrast to India's reverse flipping legal framework that is more elaborate and compliance-oriented, regulated by various pieces of legislation, such as the Companies Act 2013[xxii] and the Foreign Exchange Management Act (FEMA)[xxiii]. The main requirements are:

• In bound Merger Protocols: Where a foreign company merges into an Indian company. Under this arrangement, the operations and assets of the foreign entity are finally held by the Indian entity, and the foreign entity's shareholders are given shares in the Indian entity as consideration. [xxiv] This is usually regarded as the most basic form of internalization.[xxv] Shareholders are exempt from capital gain tax on such deals provided that the deal amounts to 'amalgamation'. Companies need to get Reserve Bank of India (RBI) approval, file certified valuation reports, and make applications before the National Company Law Tribunal (NCLT). It is obligatory to comply with FEMA (Cross Border Merger) Regulations, 2018[xxvi] and FEMA (Non-debt Instruments) Rules, 2019.[xxvii]

  
  

• ECB Compliance and Share Swap Options: Offshore liabilities assumed by the Indian entity need to meet External Commercial Borrowing (ECB) regulations [xxviii]and Foreign Exchange Management (Borrowing and Lending) Regulations, 2018[xxix], with a two-year transition period and exemptions from end-use restrictions.Certain companies go in for share swap deals under the Overseas Investment Rules (2022)[xxx] and Press Note 3 guidelines[xxxi], particularly in the pursuit of strategic flexibility. Such a path is, however, comparatively more regulatorily intensive than that of a merger.[xxxii]

  
  

C. India: Encouraging Homegrown Global Giants

India's policy change towards enabling reverse flipping is reflected in the Economic Survey 2022–23[xxxiii], which showcases government-supported schemes such as NIDHI, FFS, and Atal Innovation Mission (AIM) that have driven the growth of more than 12,000 startups and generated 130,000+ employment opportunities.[xxxiv] Other reforms are: Tax relief in GIFT City[xxxv] and angel tax relief for non-residents[xxxvi], which intend to make India a global startup domicile. Restrictions continue, mainly the lack of dual listing arrangements, which prevent simultaneous domestic and foreign IPOs. Even as GIFT City's International Exchange partly addresses the question, its lack of liquidity and depth creates challenges.

The development of Indian capital markets has also been equally impressive; this has encouraged startups to list themselves on Indian stock exchanges to a considerable extent, although not to a great extent due to the restrictions. Such prominent technology startups as Swiggy[xxxvii], FirstCry[xxxviii], Ola Electric[xxxix], Go Digit General Insurance[xl], and Unicommerce[xli], have rolled out successful Initial Public Offers on Indian stock exchanges in 2024 itself. This is a clear manifestation of increasing confidence in the Indian capital market's reach and prospects. Increasingly, Indian startups believe that Indian stock exchanges are not only a good platform to get listed successfully in the public domain but are also a preferred platform.

The preference for investment choices has also been shifting in favor of Indian-registered structures. The Indian venture capital private equity community is more enthusiastic about the easy Indian structures, which are more transparent in terms of operations, with fewer regulatory burdens. Also, the offshore investors are increasingly placing faith in the foundations of the Indian economy as well as the standards of its governance. Being founded on the principle of being grounded, having an India-based operation now faces relatively little issue with compliance and regulation, and as such, some start-ups are now questioning the need to have an offshore home. And finally, this conjunction of regulatory reforms, market expansion, and sentiment of investors means that Indian startups are not dependent on foreign jurisdictions anymore to raise capital, go abroad for expansion, or attain legitimacy. India is rapidly becoming an independent and integrated startup ecosystem.[xlii]

While Singapore, desperate to maintain its magnetism in face of growing reverse flipping trends, has reacted with far-reaching measures under Budget 2025, to intensify its startup ecosystem:

1. Strengthened IPO Ecosystem: Improved tax incentives to fund managers and initiatives to increase liquidity on the Singapore Exchange (SGX).[xliii]

2. SGD 1 Billion Private Credit Growth Fund: Providing non-dilutive capital to startups working in deep tech, advanced manufacturing, and other high-growth sectors amidst a global VC funding drought.

3. Global Founder Programme: Imports foreign founders, promotes international expansion, and fosters mentorship and funding networks with assistance from Singapore's Economic Development Board (EDB). [xliv]

4. Technology Investment Proposals: SGD 3 billion injection into the National Productivity Fund and SGD 150 million for compute and artificial intelligence infrastructure to promote productivity and future-proof workers.[xlv]

   
   

Recent success underscores operational viability and strategic value of reverse flipping:

Pine Labs (May 2024)

Pine Labs Limited, which was Singapore-incorporated in July 2013, had a 99.89% stake in its Indian operating firm, Pine Labs Private Limited. [xlvi]In May 2024, the Scheme of Arrangement under Sections 210 and 212 of the Singapore Companies Act 1967 was sanctioned by the Singapore High Court, such that the Singapore company would be merged with its Indian subsidiary.[xlvii] Subsequently, on 9th April 2025, India's National Company Law Tribunal (NCLT) Chandigarh bench sanctioned the cross-border merger under Sections 230–232 of the Companies Act 2013, following stakeholder discussions and a no-objection letter from the Reserve Bank of India (RBI) under the Foreign Exchange Management (Cross Border Merger) Regulations, 2018.[xlviii] The reverse flip allowed Pine Labs to group businesses, save considerable costs and compliance fees, and position its corporate home in sync with its India core business prior to filing its ₹2,600 crore IPO with SEBI[xlix]

Zepto (January 2025)

Zepto was functioning through Kiranakart Pte Ltd (Singapore) as a holding company and Kiranakart Technologies Private Limited (India) as an operating company. Board approval of the reverse flip was given on October 3, 2024.Leveraging deemed RBI approval under Regulation 9 of the FEMA Cross Border Merger Regulations, 2018, and streamlined processes under NCLT, Zepto secured Singapore court clearance and NCLT approval on January 9, 2025.[l] The process was done in under four months 117 days the fastest cross-border corporate restructuring to date. [li]The streamlined merger has simplified Zepto's entity structure, improved decision-making, and set the company up for a planned $400–500 million Indian IPO, supported by Goldman Sachs, Morgan Stanley, and Axis Capital.”[lii]

D. Leadership Insight and Strategic Intent

PhonePe CEO Sameer Nigam forthrightly explained the rationale for the reverse flip, saying, "India is where we began and where we are concentrated… for a variety of reasons such as being a highly regulated organization and wanting to ultimately list here, the change of domicile… is the proper solution." Nigam emphasized listing in India is "not merely a fiscal choice but a responsible move," designed to enhance credibility with regulators, investors, and users. However, while listing abroad comes with its own benefits to startups such as cash kitties or access to capital that may aid their development and expansion plans, Harshil Mathur, the co-founder of Razorpay, gave a different reason for why it is important for startups to list either only or also in the Indian markets. He stated, "India is a home market and a geography where everyone knows and understands. From a listing point of view, it makes sense to be in India.".[liii]

Legal and Investment Community Support

Legal and investment circles have also supported the shift. "It's no longer a symbolic shift, but a strategic shift because of greater liquidity, stability, and a sophisticated investor base," said Roma Priya, who founded Burgeon Law. "Therefore, better capital markets and better regulations are encouraging companies to choose India as a listing destination," said Manu Iyer, partner with Bluehill VC, while Mohit Bhatnagar, Peak XV (formerly Sequoia Capital India), agreed, "It's become the single biggest topic of discussion among startup investors." Such comments highlight not just the growing interest among investors, but also the evolving capital market structure, which has created a value proposition attractive to local and international players alike.[liv]

E. Conclusion

This optimism in the market expressed in various ways by the market participants finds support in their market performance. The IPO market in India remains robust and attractive with high multiples and record retail participation. In 2024, the median P/E ratio of Indian IPOs was 21.5x, which was substantially higher than the average of 14x found in the United States and 12x for Europe.[lv] It has been a major factor in helping private equity and venture capital investors to seek proper exit strategies.

Retail Momentum and Prominent Deals

The retail investors have seen steady interest, with a monthly influx of approximately USD 2.7 billion through Systematic Investment Plans in mutual funds. Marketeer IPOs have further reinforced the resonance of the market: Hyundai India raised USD 3.3 billion at USD[lvi] 18.2 billion valuation; Swiggy raised USD 1.4 billion[lvii]; Ola Electric raised USD 734 million[lviii]; and Bajaj Housing Finance saw a 63x oversubscription, reflecting strong investor interest and optimism.”[lix]

Author: Advika Mattoo, in case of any queries please contact/write back to us via email to chhavi@khuranaandkhurana.com or at  Khurana & Khurana, Advocates and IP Attorney.

[i] https://www.sebi.gov.in/legal/regulations/mar-2025/securities-and-exchange-board-of-india-issue-of-capital-and-disclosure-requirements-regulations-2018-last-amended-on-march-8-2025-_93559.html 

[ii] https://www.nishithdesai.com/NewsDetails/9600

[iii] https://www.sebi.gov.in/legal/regulations/mar-2025/securities-and-exchange-board-of-india-issue-of-capital-and-disclosure-requirements-regulations-2018-last-amended-on-march-8-2025-_93559.html 

[iv] https://vinodkothari.com/2025/06/sebi-approves-a-mix-of-reforms-for-regulated-entities/ 

[v] https://www.angelone.in/news/market-updates/sebi-proposes-clarifications-on-minimum-holding-period-and-esops-for-founders

[vi] https://www.nishithdesai.com/NewsDetails/9600 

[vii] https://www.sebi.gov.in/legal/regulations/aug-2021/securities-and-exchange-board-of-india-share-based-employee-benefits-and-sweat-equity-regulations-2021_51889.html 

[viii] https://www.business-standard.com/markets/news/sebi-eases-compliance-startups-esops-drhp-psu-delisting-norms-125061801314_1.html

[ix] https://bmrlegal.in/wp-content/uploads/2025/06/esop-incentive-for-founder-promoters-sebis-positive-measure_bmr-alert-v3.pdf 

[x] https://www.nishithdesai.com/NewsDetails/9600

[xi] https://yourstory.com/2025/04/dream11-parent-company-shifts-domicile-india 

[xii] https://lexcomply.com/blog/sebi-abolishes-1-security-deposit-requirement-for-public-issues/ 

[xiii] https://www.dlapiper.com/en-nl/insights/publications/2025/05/a-listing-strategy-for-global-companies-and-financial-sponsors-india

[xiv] https://www.nishithdesai.com/NewsDetails/9600

[xv] https://www.legal500.com/developments/thought-leadership/reverse-flipping-is-it-time-to-return-home/ 

[xvi] https://www.dlapiper.com/en-nl/insights/publications/2025/05/a-listing-strategy-for-global-companies-and-financial-sponsors-india 

[xvii] https://www.nishithdesai.com/NewsDetails/9600 

[xviii] https://www.pwc.in/assets/pdfs/news-alert-tax/2020/pwc_news_flash_18_april_2020_fdi_press_note_3_amendment.pdf 

[xix] https://incorpadvisory.in/blog/tax-incentives-announced-in-budget/ 

[xx] https://v1.lawgazette.com.sg/2002-3/Mac02-focus2.htm 

[xxi] https://law.asia/indian-startups-reverse-flipping/#:~:text=In%20recent%20years%2C%20there,startups%20seeking%20long%2Dterm%20growth 

[xxii] https://www.indiacode.nic.in/bitstream/123456789/2114/5/A2013-18.pdf 

[xxiii] https://www.indiacode.nic.in/bitstream/123456789/1988/1/A1999_42.pdf 

[xxiv]  https://www.nlsblr.com/post/back-to-bharat-analysing-the-reverse-flipping-merger#_ftn1 

[xxv] https://www.legal500.com/developments/thought-leadership/tax-implications-of-reverse-flipping-in-india/ 

[xxvi]https://enforcementdirectorate.gov.in/sites/default/files/Act&rules/Foreign%20Exchange%20Management%20(Cross%20Border%20Merger)%20Regulations,%202018_0.PDF 

[xxvii] https://incometaxindia.gov.in/Documents/Provisions%20for%20NR/FEM-Non-debt-Instruments-Rules-2019.htm 

[xxviii] https://www.rbi.org.in/commonman/english/scripts/FAQs.aspx?Id=1999 

[xxix] https://incometaxindia.gov.in/Documents/Provisions%20for%20NR/FEM-%20Borrowings-and-Lending-Regulations-2018.htm 

[xxx] https://incometaxindia.gov.in/Documents/Provisions%20for%20NR/FEM-Overseas-Investment-Rules-2022.htm 

[xxxi] https://dpiit.gov.in/sites/default/files/pn3_2020.pdf 

[xxxii] https://www.nishithdesai.com/NewsDetails/9600 

[xxxiii] https://incorpadvisory.in/blog/tax-incentives-announced-in-budget/ 

[xxxiv] https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2043805 (2024 before amendement)

[xxxv] http://barandbench.com/law-firms/view-point/incentivising-foreign-investments-angel-tax-exemption-for-start-ups-and-non-resident-entities 

[xxxvi] https://law.asia/indian-startups-reverse-flipping/#:~:text=In%20recent%20years%2C%20there,startups%20seeking%20long%2Dterm%20growth 

[xxxvii] https://paytm.com/blog/stock-market/swiggy-ipo-november-2024/ 

[xxxviii] https://www.business-standard.com/markets/stock-market-news/firstcry-ipo-to-open-on-august-6-here-s-all-you-need-to-know-about-issue-124080200779_1.html 

[xxxix] https://www.ndtv.com/auto/ola-electric-ipo-to-open-between-august-2-to-august-6-2024-listing-likely-on-august-9-2024-6203288 

[xl] https://old.smctradeonline.com/upcoming-ipo/go-digit-ipo 

[xli] https://www.religareonline.com/ipo/unicommerce-esolutions-ipo/ 

[xlii] https://law.asia/indian-startups-reverse-flipping/#:~:text=In%20recent%20years%2C%20there,startups%20seeking%20long%2Dterm%20growth 

[xliii] https://www.mas.gov.sg/news/media-releases/2025/a-comprehensive-set-of-measures-to-strengthen-singapores-equities-market 

[xliv] https://law.asia/indian-startups-reverse-flipping/#:~:text=In%20recent%20years%2C%20there,startups%20seeking%20long%2Dterm%20growth 

[xlv] https://www.hawksford.com/insights-and-guides/sg-budget-2025-business-guide 

[xlvi] https://inc42.com/buzz/pine-labs-awaits-india-nod-for-reverse-flip-after-singapore-approval/ 

[xlvii] https://economictimes.indiatimes.com/tech/technology/pine-labs-gets-nclt-nod-to-reverse-flip-singapore-entity/articleshow/120162888.cms 

[xlviii] https://www.medianama.com/2025/06/223-pine-labs-drhp-rs-2600-cr-ipo-sebi/ 

[xlix] https://economictimes.indiatimes.com/tech/startups/about-20-unicorns-have-asked-about-domicile-shift-phonepes-sameer-nigam/articleshow/97307712.cms?from=mdr 

[l] https://entrackr.com/news/zepto-completes-reverse-flip-from-singapore-to-india-8661011 

[li] https://www.business-standard.com/companies/news/quick-commerce-unicorn-zepto-completes-reverse-flip-from-singapore-to-india-125012800919_1.html 

[lii] https://cfo.economictimes.indiatimes.com/news/strategy-operations/zepto-completes-reverse-flip-from-singapore-to-india-ahead-of-ipo-cfo/117666545 

[liii] https://www.cnbctv18.com/business/startup/exclusive-phonepe-ipo-plan-details-from-ceo-sameer-nigam-on-market-payments-business-19607913.htm 

[liv] https://www.entrepreneur.com/en-in/news-and-trends/reverse-flip-gains-momentum-why-indian-startups-are-coming/494468#:~:text=Sameer%20Nigam%2C%20CEO%20PhonePe%2C%20had,domicile%20is%20the%20right%20answer 

[lv] https://marketedge.dlapiper.com/2025/05/opportunities-for-ipos-in-indias-capital-markets/ 

[lvi] https://ddnews.gov.in/en/hyundai-motor-indias-record-3-3-billion-ipo-fully-subscribed-on-final-day-of-bidding/ 

[lvii] https://www.financialexpress.com/market/ipo-news-swiggy-eyes-600-million-fresh-issue-in-upcoming-ipo-total-size-may-reach-1-4-billion-3607323/ 

[lviii] https://theprint.in/india/indias-ola-electric-to-launch-734-million-ipo-investors-eye-bids-at-lower-valuation/2196412/ 

[lix] https://www.dlapiper.com/en-nl/insights/publications/2025/05/a-listing-strategy-for-global-companies-and-financial-sponsors-india