PhonePe’s Co-founder pays 8000 cr in taxes to move to India

The investors of Flipkart-owned digital payments firm PhonePe paid 8000 crore in taxes to move its domicile from Singapore to India.

If you want to move to India as a domicile, you have to do a fresh market valuation and pay tax on the delta. Our investors have paid almost 8000 crores in taxes just to be able to come back to India," Sameer Nigam, Co-founder and CEO, PhonePe, said at a live YouTube session.

The move was completed in October when the company shifted all of its businesses and subsidiaries of PhonePe Singapore to PhonePe Pvt Ltd India, including its insurance broking services and wealth broking businesses.

Nigam, along with the company's Co-founder and CTO Rahul Chari, addressed questions about PhonePe's recent $350 million fundraise, its redomicile and future plans during the live session.

I think that India is where we started and where we are focused on because of the mission of PhonePe which is solving for at-scale financial inclusion and digitisation. He explained the reasons behind the move, as a highly regulated entity and wanting to list here, the change of domicile to India for PhonePe as a business and as a company is the right answer.

The company had to migrate existing ESOPs of over 3000 employees by issuing new ESOPs under PhonePe India's new plan, which Nigam said was a major challenge.

Another challenge was to convince several thousand employees that their ESOPs are back to zero after a one-year cliff, because the law in India says if you migrate you still have to start with a new one-year cliff. It's very hard for startups to convince employees that their ESOP vesting status reverts back to zero, because of the fact that their ESOP vesting status reverts back to zero, he said.

Nigam spoke about the need for more progressive Indian laws that allow start-ups to move back to India.

In December, PhonePe announced its separation from its parent company and e-commerce giant Flipkart. Both companies now function as separate entities with Walmart remaining the majority stakeholder in them. Nigam said that the spin-off from Flipkart gave the company the chance to raise funds from other investors who may have their investment strategies aligned to the fintech and payments where PhonePe operates.

PhonePe raised $350 million from General Atlantic a week after the spin-off announcement. The company is the most valued privately-owned fintech firm in the country, as a result of the transaction's pre-money valuation of $12 billion. This round is the first tranche of an up to $1 billion total fundraise.

General Atlantic is a good blue chip global investor that has a long view on companies, giving us the flexibility to invest in new sectors like insurance, lending, broking or ONDC. They understand what we're trying to do well and they are tracking the ecosystem. Sameer added that it was just easy alignment at several levels, obviously excited to have them anchor the round.

Rahul Chari said the company will launch new products and offerings like lending on the merchant side, lending on the consumer side, and new open API initiatives like account aggregator and ONDC, as well as new initiatives that are coming on UPI.