Razorpay Relocates Headquarters to India
Bengaluru-based fintech unicorn Razorpay is making a significant shift by relocating its headquarters from the United States back to India. This move comes amid a growing trend of Indian startups returning to their home country. The decision aligns with the Indian government’s efforts to facilitate “reverse flipping,” allowing companies based overseas to return to India more easily. Razorpay’s transition is not just a strategic move; it also sets the stage for the company to go public by 2026.
The Reverse Flipping Trend
The trend of reverse flipping is gaining momentum among Indian startups. Many companies that initially set up their headquarters abroad are now reconsidering their positions. Razorpay’s decision to relocate is a clear indication of this shift. The company is navigating the complexities of changing its corporate structure, which comes with significant tax implications estimated at around $300 million.
Harshil Mathur, co-founder and CEO of Razorpay, explained that while the process is straightforward, it does take time. The company has opted for a fast-track route to expedite the process. The National Company Law Tribunal (NCLT) is currently handling numerous cases, which can delay approvals. However, recent regulatory changes have reduced the timeline for reverse flipping to less than six months. This is a positive development for Razorpay as it seeks to streamline its operations and focus on its core business.
Seeking Regulatory Approval
As part of the relocation process, Razorpay is currently seeking approval from the Reserve Bank of India (RBI). This step is crucial as it helps alleviate some of the workload on the NCLT. Mathur emphasized that the Indian market understands Razorpay’s business model, making it logical for the company to list in a market where it is well-known. Although the transition comes with costs, Mathur believes the long-term benefits outweigh these challenges.
Industry insiders have noted that the new regulations have made it easier for companies like Razorpay to navigate the reverse flipping process. The deemed approval from the RBI, contingent upon compliance with the Foreign Exchange Management Act (FEMA), simplifies the approval process. This regulatory clarity is expected to facilitate a smoother transition for Razorpay and other companies considering similar moves.
Financial Growth and Future Plans
Razorpay has experienced significant growth over the past decade. The company, founded by Mathur and his IIT-Roorkee batchmate Shashank Kumar, has served over 5 million businesses and 200 million end consumers in India. With an annualized total payment volume (TPV) of $180 billion, Razorpay has established itself as a key player in the fintech sector. The company is currently valued at $7.5 billion and has initiated discussions with investment bankers regarding a potential public offering.
In the financial year 2023-24, Razorpay reported a 9% increase in revenue, reaching Rs 2,501 crore, up from Rs 2,293 crore the previous year. Its net profit rose fivefold to Rs 34 crore during the same period. Mathur indicated that the company aims to break even in its payments business before pursuing an IPO. He believes that public markets favor predictable business models, and Razorpay is committed to achieving this goal.
Expanding Horizons
Razorpay’s growth is not limited to India. The company is actively exploring international markets, having recently entered Malaysia and planning to expand into Singapore soon. Currently, online payments account for 40% of Razorpay’s business, with expectations of a growth rate exceeding 50% year-over-year for the next few years. Mathur anticipates that the revenue mix will shift from 80-85% payments and 15-20% software subscriptions to a more balanced 60-40 ratio in the coming years.
Observer Voice is the one stop site for National, International news, Editor’s Choice, Art/culture contents, Quotes and much more. We also cover historical contents. Historical contents includes World History, Indian History, and what happened today. The website also covers Entertainment across the India and World.