Implementation of SPACs in India Key Regulatory challenges

Implementation of SPACs in India Key Regulatory challenges.

- Tuhin Harit

Special Purpose Acquisition Vehicles (SPACs} have emerged as a promising option to raise public funding from offshore markets. They are especially suited for startups, who otherwise find it difficult to excite the conservative Indian retail investors. This hos become all the more critical as there is evidence that private funding may be drying up and it may be a while before it returns as a substantial source of capital for start-ups. With SPACs, the start-up gets Listed through a reverse merger with a Listed shell company, i.e.,the SPAC, which acquires the start-up. Indian Laws also need to be suitable amended to facilitate overseas fundraising by startups.

SPACS REGULATORY evolution - globally

Globally, SPAC regulations have evolved over the past many years. SPAC structures are more shareholder friendly and have ample fail-safe measures to prevent fraud.

Lock-in periods ensure that founders have some"skin in the game" and minimize agency costs. Successful SPAC listings over the years hove reduced risk perceptions and, consequently, the associated upfront costs, such as underwriter's fee, hos also come down. India has seen a reasonable number of acquisitions by SPAC recently:

Yotra was acquired by Terrapin 3 Acquisition Corp (TRTU, a NASDAQ-listed SPAC. TRTL was Listed on NASDAQ in 2014 and Deutsche Bank was their underwriter.

Videocon DTH was listed on the NASDAQ through a reverse merger with Silver Eagle Acquisition Corp, a SPAC. Silver Eagle was listed in 2014 and Deutsche Bank was their underwriter.

Constellation Alpha Capital Corp., a SPAC, was listed on the NASDAQ in 2017. It is focussed on acquiring a target in healthcare services and manufacturing industry in India. Cowen acted as the underwriter for the offering.

In addition to the above, there have been multiple SPAC acquisitions in India in the past, including: