The Strategic Importance of Corporate Structures: Lessons from Groww, Razorpay and Zepto
2024 has seen some massive reverse flipping of corporate structures resulting into hundreds of crores of tax impact. Not suggesting that these reverse flips are redundant but someone needs to think who's paying for these costs and is there a way to plan the corporate structures more strategically in a proactive manner.
In the fast-paced world of startups, the way a company structures itself can be as important as the product or service it offers. Recent corporate moves by companies like Groww, Razorpay and Zepto have highlighted the significance of how businesses organize their corporate structures. This strategic shift, often called "corporate flipping," involves setting up holding companies in foreign jurisdictions and has been instrumental in helping these companies grow, attract investors, and manage their operations more effectively.
But why is structuring a holding company so important? Let’s take a closer look at the key reasons.
Companies like Groww, Razorpay and Zepto have recently gained attention for flipping their corporate structures preempting to ride the IPO wave in India. Originally they structured the parent holding company in a foreign country —commonly in places like Singapore or the US — where business environments are more conducive to scaling and international investment from global venture capital firms.
Why a Well-Structured Holding Company Matters because of all or some of the following factors -
What's important to understand is "one size does not fit all". Each startup needs to take into account several factors such as the industry they operate into, the location of their customers (if it matters), probability of value maximisation etc. while deciding about their corporate structure.
As an example, any consumer facing business will find it will eventually find more probability of finding large value maximisation in India. Similarly, for business targeting APAC markets could find more value in setting themselves in Singapore, likewise UAE for the MENA region.
领英推荐
For startups aiming for international growth and long-term success, a well-structured corporate structure isn’t just a legal necessity — it’s a smart business decision. By understanding the benefits and positioning themselves accordingly, companies can lay the groundwork for sustainable global growth and future success.
What are your perspectives on this topic? Do you concur or counter?
_____
About CFOLogic:
CFOLogic is an international CFO and FinOps firm. We have been working with tech businesses to optimise finance costs and maximise their peace of mind. Acting as extended finance teams for our clients, we have been providing support to accelerate their sustained growth by ensuring alignment within the finance function. Our experience has been with wide ranging businesses across industries, size, geographies, and lifecycle — from start-up to fundraise to scaleup to exit.
More about us: CFOLogic.com