‘Ghar-wapsi of Indian companies’: Zerodha’s Nithin Kamath lauds govt move to fast-track start-ups’ ’reverse flipping’

Zerodha co-founder Nithin Kamath on Wednesday appreciated the government’s move to ease the approval process for merging a company, particularly a start-up, incorporated outside the country with its wholly-owned Indian arm.

The Ministry of Corporate Affairs announced in a notification on Tuesday that any merger between a foreign holding company incorporated outside India and its wholly owned subsidiary incorporated in India will now require prior approval from the Reserve Bank of India (RBI).

With the latest move, the government has scrapped the need for time-consuming clearance from the National Company Law Tribunal (NCLT). According to industry experts, the requirement for the Indian subsidiaries to seek NCLT approval has been delaying the mergers.

The new regulations aim to promote ‘reverse flipping’ by quickening the approval process. Reverse flipping means a startup registered outside the country moves its headquarters back to India, usually to take advantage of the local regulatory or investment environment.

Kamath highlighted the growing Indian stock market, the rising number of investors, and companies with market capitalisations over $1 billion.

“The number of companies with a market cap >$1 billion is at an all-time high. Along with this, the allocation of Indian households' investments in the stock market has also increased substantially,” Kamath wrote on X.

“There are now 10 crore unique investors, compared to 3 crore in 2020. Thanks to the bull market and the ease of going public, there's a 'ghar-wapsi' of Indian companies incorporated outside.

Move to help promote 'reverse flipping'

To add to this, the Ministry of Corporate Affairs (MCA) formally opened the doors of 'reverse flipping' or coming home to India yesterday,” he added.

Kamath also stated that Indian firms face challenges outside the country and advocated for more businesses to be located in India.

“Three years ago, I shared the problem of Indian companies building for India but incorporating outside the country. Now, things are the other way around. How the tables turn! What we need now are more Indian businesses, located in India, building products and services for the global market,” Kamath wrote on X.

Lastly, Kamath referred to a report by Mario Draghi, the former president of the European Central Bank, which stated that around 30 per cent of unicorns in Europe relocated their headquarters.

“By the way, here’s a relevant tidbit from the recent report by Mario Draghi: between 2008 and 2021, close to 30% of unicorns founded in Europe relocated their headquarters abroad, with the vast majority to the US,” Kamath wrote in his post.