Bhoomika Singh
Earlier this month, Flipkart-backed Indian payments service company PhonePe announced that it had completed the move of its headquarters from Singapore to India.
Indian e-commerce giant Flipkart is a subsidiary of American supermarket behemoth Walmart which bought a 77 per cent stake in the company in 2018.
This is a rather unusual move as many Indian startups are doing the reverse and prefer to be headquartered in Singapore due to specific reasons. Market speculation is that the action is due to PhonePe’s preparation for a stock exchange listing in India.
PhonePe’s parent, Flipkart continued to have its head office on the Southeast Asian island nation. Flipkart incorporated its holding company in Singapore in the early part of last sought foreign investments to that it could grow faster.
Also Read: How FMCG companies in India can beat the growing inflation
This was because it had problems with the Indian bureaucracy which had then imposed various rules on certain industry sectors which made funding in its home country difficult. It, therefore, conceived a corporate structure to site the main company in Singapore so that it could receive funding more easily and made the Indian companies subsidiaries of the Singapore entity.
Singapore is well-known for being an easy place to do business. It is number one in the world on the Heritage Foundation’s index of economic freedom, number one in the World Economic Forum global competitiveness report last published in 2019 and number two in the World Bank ease of doing business ranking (2020).
Furthermore, it has low taxes – both corporate tax and goods and services tax rates are lower than India’s – and there are no capital gains tax or tax on dividends for shareholders.
Also Read: PM asks startups to take advantage of space sector opportunities
Many savvy Indian entrepreneurs have either immigrated to Singapore or established strong economic ties with the country, making it a key financial and investment hub for many Indian businesses. Based on a report by India Briefing, over 8,000 Indian companies have registered in Singapore since 2000. Many of them register their businesses online in Singapore without even coming to the country.
In recent years, Singapore has emerged as the “Silicon Valley of Asia”. It has a flourishing startup ecosystem where many venture capital firms are based. Other factors which have worked to create this are the ready availability of government funding, favourable tax schemes for startups, and abundant people with the requisite skills that tech firms need.
Singapore is ranked first in Asia and seventh globally in Startup Blink’s Global Startup Ecosystem Index 2022. Singapore’s startup ecosystem has a value of USD 25 billion, far exceeding the global average of USD5 billion, and early-stage funding per startup totalling USD202,000.
Also Read: Reason behind big efflux of Indian Startups to Singapore
Based on figures from Enterprise Singapore, Singapore logged 517 funding deals in the first nine months of this year, amounting to USD 8 billion in total.
Ms Grace Sai, the co-founder of the sustainability-focused startup, Unravel Carbon, said to Singapore online newspaper TODAY, “The market size of Southeast Asia or Asia alone is big enough to create category-winning companies. So, for some companies, it’s never their strategy to be global.” However, regional countries are beginning to catch-on on to Singapore’s success and looking to emulate it.
Likewise, India appears to be taking steps to curb the startup exodus from the country. Two weeks ago, Finance Minister Nirmala Sitharaman said that the government is ready to engage with startups to address issues facing the ecosystem.
“So, I would think continuous engagement with the startups is what is going to help them to, one, remain and, second, do better within India. But, if there are temptations for which they would want to go outside, we need to understand how much we can entertain and serve on those courses. Not all of them are possible but equally, we can try,” said Sitharaman.
