The government is reportedly considering a regulatory framework for special purpose acquisition companies (SPACs) to lay the ground for the possible listing of Indian companies through this route in the future.


Background –

The Company Law Committee, which was set up in 2019 to make recommendations to boost ease of doing business in India, has made this suggestion in its report submitted to the government recently.


What is a SPAC?

  • A SPAC, or a blank-cheque company, is an entity specifically set up with the objective of acquiring a firm in a particular sector. The aim of this SPAC is to raise money in an initial public offering (IPO), and at this point in time, it does not have any operations or revenues.
  • Once the money is raised from the public, it is kept in an escrow account, which can be accessed while making the acquisition. If the acquisition is not made within two years of the IPO, the SPAC is delisted and the money is returned to the investors.
  • According to the SEC, certain market participants believe that, through an SPAC transaction, a private company can become a publicly-traded company “with more certainty as to pricing and control over deal terms as compared to traditional IPOs”.
  • On the other hand, a key factor that makes SPACs attractive to investors despite them essentially being shell companies, are the people sponsoring the blank-cheque company. Globally, prominent names such as former NBA star Shaquille O’Neal, tennis star Serena Williams, former TikTok CEO Kevin Mayer, Dell Technologies founder and CEO Michael Dell, billionaire and venture capitalist Vinod Khosla etc. have participated in SPACs.


SPACs in India

  • In India, renewable energy producer ReNew Power recently announced an agreement to merge with RMG Acquisition Corp II, a blank-cheque company, in what became the first involving an Indian company during the latest boom in SPAC deals. The merger of ReNew Power with RMG Acquisition will result in the former’s listing on Nasdaq and gross cash proceeds of around $1.2 billion.
  • In addition to this, online grocery platform Grofers is also reportedly in advanced stages of exploring a SPAC deal. According to news reports, venture capital firms Elevation Capital and Think Investments are expected to launch a SPAC focused on Indian technology companies seeking to list in America.
  • Furthermore, while India has not taken an official regulatory stand on allowing the listing of SPACs here, the Security and Exchanges Board of India (SEBI) has reportedly formed a group of experts to study the feasibility of bringing SPACs under the regulatory ambit. However, the Indian regulatory framework does not allow the creation of these blank cheque companies as yet. For example, the Companies Act 2013 stipulates that the Registrar of Companies can strike off a company if it does not commence operations within a year of incorporation.



  • For SPACs, the biggest opportunity is also the biggest threat — depending on from which side it is looked at. As per the 2021 statistics, out of the 281 SPAC listings that have happened, only two have announced their targets.
  • Also, out of the 248 SPAC listings in 2020, 138 are still searching for targets. The boom in investor firms going for SPACs and then looking for target companies have tilted the scales in favour of investee firms. This has the potential, theoretically, to limit returns for retail investors post-merger.
  • Also, even as the SPACs are mandated to return money to their investors in the event no merger is made within two years, fineprint of several SPAC prospectuses shows that certain clauses could potentially prevent investors from getting their monies back. Historically, though, this has not happened yet.


Way forward

  • This is not to suggest that the Indian regulator should not encourage start-ups to list. In fact, there is a case for easing listing requirements.
  • SEBI published a discussion paper recently for the Innovators Growth Platform with encouraging proposals. Some of the start-ups have gained significant size, though they are not yet making profits.
  • Perhaps the regulator could consider allowing firms with assets or revenue above a threshold to list on the main exchanges with full disclosures. Investors would know the risks of investing in such companies. This will be a more transparent way of letting start-ups above a certain size to raise capital and allowing investors to participate in the new economy.