Indian startups like Singapore. It’s easier to raise funding when you’re headquartered there. Simply because there are a lot of VCs who’ve set up base in the island nation. Singapore has a lower corporate tax of 17% compared to over 25% in India. So that’s always appealing. And most importantly, investors in companies don’t have to pay a tax on capital gains when they sell shares. That’s an added bonus. (View Highlight)
Also, it’s just easier to do business in Singapore. In 2020, the World Bank ranked India 63rd in terms of ease of doing business. But Singapore snagged the 2nd spot. So it’s no wonder that in the past two decades, over 8,000 Indian companies have made Singapore their official home. (View Highlight)
Okay, let’s explain. See, when PhonePe shifted its HQ, it had to move investors from one entity to another — from PhonePe Singapore to PhonePe India. So they had to swap shares. For instance, if they bought a share at 10intheSingaporeentitythatisnowworth100, the investors were expected to pay a tax on the valuation gains. Even if the investors weren’t cashing out and were just swapping shares. (View Highlight)
Also, investors in India just seem more willing to pay up when compared to their global peers. As The CapTable pointed out, while Zomato commands a valuation of 12–13 times its FY22 revenues, the US-listed DoorDash trades at a measly 4–5 times its revenue. (View Highlight)
Instead, they make their money through commissions when their customers make bill payments like electricity or water bills. Or through advertisements. So PhonePe needs more revenue sources. And that’s where its plans to distribute mutual funds and even launch its own mutual fund company come into the picture. Then there’s the insurance broking business that could become a solid revenue stream too. (View Highlight)
Because everyone wants a loan these days. Digital lending in India is currently a $270 billion market and could quadruple by 2030. There’s a lot of money you could make from interest payments alone. And if you look at PhonePe’s rival Paytm, you’ll notice that 11% of its revenues in FY22 came from the loan business. So lending is quite lucrative. (View Highlight)
But the point is that if PhonePe decided to list outside the country. Or maybe even kept its headquarters in Singapore, the RBI may not have allowed PhonePe’s fintech ambitions to take root. Especially in lending. The central bank wants complete oversight over digital lenders and every few months, there’s a new rule or regulation coming in. Maybe that explains why PhonePe needed to come back to India. (View Highlight)
