PhonePe investors paid heavily for India

PhonePe, the Indian digital payments firm backed by Walmart and Tencent, has revealed that its decision to relocate from Singapore has cost its investors a significant amount in capital gains taxes. According to CEO Sameer Nigam, the shift has resulted in a “shocking” INR 8,000 crore ($1.1 billion) in taxes for the company’s investors. Additionally, the move also means that the company will lose the opportunity to offset $900 million of accumulated losses against future profits, as local tax authorities view the change in domicile as a restructuring event.

Nigam also noted that the shift in domicile has caused a disruption for employees as well, as they now have to start anew with their employee stock option (Esop) vesting period according to Indian laws. He explained that it can be difficult for startups, especially early-stage ones, to convince employees to accept the additional vesting period required by Indian laws.

The company decided to change its domicile to India in October in order to list its stock on domestic exchanges and create value for shareholders and the local ecosystem. Nigam said that PhonePe was able to withstand the financial impact of the move because its investors have a long-term perspective. He also mentioned that after PhonePe’s domicile shift, approximately 20 unicorn startups and their investors reached out with the intention of changing their domicile back to India, but did not disclose the names of the companies.

Nigam also revealed that PhonePe had raised $350 million from private equity firm General Atlantic at a valuation of $12 billion following the domicile shift, and that more investors, including Tiger Global, are planning to invest up to $1 billion in the company. PhonePe originally announced plans to go public in 2023, but since then, the company has undergone changes, such as separating from Flipkart in December. Nigam did not provide a specific timeline for an initial public offering.