In perhaps the first warning by a significant start-up curator against “flipping”, a Naukri.com and Zomato investor has said foreign funds are the new East India Company that are colonising successful start-ups in India by transferring ownership overseas to skip Indian regulations and taxes.

Internet entrepreneur Sanjeev Bikhchandani says an estimated Rs 17 lakh crore of market cap has been transferred abroad after young Indian start-ups were forced to shift their company domicile overseas by foreign investors promising the funds they need for growth.

“Shades of the East India Company type of situation here — Indian market, Indian customers, Indian developers, Indian workforce. However 100% foreign ownership, foreign investors. IP and data transferred overseas. Transfer pricing issues foggy,” he tweeted.

“Basically institutionalised transfer of wealth away from India while living off the Indian market and Indian labour somewhat like the days of the Company rule.”

Profits from such “global exploitation” of intellectual property (IP) created in India by Indians retained overseas. “Tax to Indian govt on such profits??? Indian investors shut out,” he tweeted.

Reached for comments on his tweets, Bikhchandani, whose BSE-listed firm Info Edge (India) owns job search portal naukri.com, matrimony site jeevasathi.com and real estate search engine 99acres.com, said flipping is externalising a company.

“You take an Indian start-up and transfer ownership of all its shares to an overseas company that has been usually freshly floated just for this purpose. So now the Indian company becomes a 100 per cent subsidiary of the overseas entity,” he said.

All shareholders will own shares in that overseas company, including the founders, employees and current and past investors. This is accompanied by transfer of all IP and data hitherto owned by the Indian company.

“All IP developed and all data captured by the Indian entity in the future will also belong to the overseas entity,” he said. “This overseas company is substantially outside of Indian jurisdiction and the influence of Indian regulators.”

While foreign funds are most welcome, the government and its regulations must insist that data and the IP belong to the Indian subsidiary and cannot be owned by the overseas entity, particularly in sensitive sectors, he said.

Bikhchandani, a Padma awardee whose company also owns stakes in online food delivery outfit Zomato and insurance marketplace policybazaar.com, said if this flipping option was not available, most investors would invest in Indian start-ups regardless.