Freo Joins Reverse Flip Trend: Digital Banking Startup Relocates from Singapore to India

Digital banking startup Freo, backed by Peak XV, is set to relocate its domicile from Singapore to India, marking a significant shift in the startup landscape. This move aligns with a growing trend of startups returning to their home market, driven by the expanding opportunities within India’s financial sector.

Freo, which operates under Singapore-headquartered MyCash Fintech, is in the early stages of discussions regarding this transition. The decision stems from the favorable conditions in India’s burgeoning financial market and improved company valuations, making it an appealing environment for growth.

Initial Steps Toward the Move

Freo has begun internal discussions about the move, indicating that the process is still in its preliminary phase. The relocation is viewed as a strategic opportunity to enhance expansion efforts and optimize financial performance.

Financial Performance

Freo has reported sustainable profits since December 2023, achieving a gross revenue of ₹350 crore for the financial year 2023-24. The firm boasts a positive contribution margin for three consecutive years, showcasing its resilience and stability in a competitive market.

Background of Freo

Founded in 2015 by Anuj Kacker, Kunal Verma, and Bala Parthasarathy, Freo initially operated as MoneyTap, offering personal loans before rebranding to its current identity. The company has since evolved into a neobank, providing a wide array of services including digital savings accounts, personal credit lines, and wealth management products.

Customer Base and Growth

In just five years, Freo has amassed nearly 11 million customers, claiming profitability since late 2023 and achieving a fivefold revenue increase year-on-year, with a total user base of around 25 million.

The Reverse Flip Trend

The trend of reverse flipping offers multiple benefits for startups like Freo:

• Tax Advantages: Relocating back to India can yield significant tax benefits.
• IPO Readiness: A return to India may enhance the prospects for initial public offerings (IPOs).
• Regulatory Changes: Recent policy updates have simplified the transition process for startups.

Regulatory Landscape

In a bid to streamline operations for overseas startups, the Indian corporate affairs ministry has exempted them from seeking clearance from the National Company Law Tribunal (NCLT) when merging with their Indian subsidiaries. New rules, effective from September 17, require approval from the Reserve Bank of India and government consent, expediting the transition process.

Other Startups Following Suit

Freo joins a growing list of companies like PhonePe, Groww, and Pepperfry that have successfully relocated to India. Other notable firms, including Razorpay, Meesho, Kreditbee, Eruditus, Zepto, Flipkart, and Khatabook, are also considering similar moves.

Important Points

• Domicile Shift: Freo’s potential relocation reflects a broader trend of startups returning home.
• Financial Health: Recent profitability and revenue growth highlight Freo’s stability in a competitive environment.
• Regulatory Support: Changes in regulations are easing the path for overseas startups looking to operate in India.

As Freo embarks on this significant journey, its move underscores the increasing appeal of the Indian market for fintech and digital banking startups, paving the way for future growth and innovation.