Reverse Flipping

Facts for Prelims

Reverse Flipping

News: The term Reverse Flipping was observed in Economic Survey 2022-23.

What is Flipping and Reverse Flipping?
 Flipping refers to the process of transferring the entire ownership of an Indian company to an overseas entity, accompanied by a transfer of intellectual property (IP) and all data hitherto owned by the Indian company.
 This effectively transforms an Indian company into a 100 per cent subsidiary of a foreign entity, with the founders and investors retaining the same ownership via the foreign entity, having swapped all shares.
 Whereas ‘reverse flipping’ is shifting their domicile back to India due to factors such as easy access to capital from private equity and venture capital, changes in rules regarding round-tripping, and the growing maturity of India’s capital markets.

Why Startups were flipping before?
 Challenges faced by start-ups such as funding hurdles, revenue generation struggles, lack of easy access to supportive infrastructure, and a complex regulatory tax environment.
 Start-ups have been headquartered overseas, especially in destinations with favorable legal environments and taxation policies.