SPACS have generated tremendous interest in India, but are these re-emerging investment tools really a practical alternative to IPOs and a panacea for reviving capital markets? And just how tightly should they be regulated? Freny Patel reports

Flipkart, Policybazaar, Zomato, Grofers, Delhivery and Droom are just some of the unicorns in the market planning fundraising to meet their future growth projections. As most of these home-grown Indian tech startups are far from profitable, an overseas listing by way of a reverse merger with a blank cheque company should be their only option.

Enter the SPAC, or special purpose acquisition company, essentially a shell corporation created and listed on the stock exchange with the sole purpose of acquiring an unlisted company and making it public without having to go through the traditional process of an IPO.

Thousands of Indian companies vying to go public and raise funds from the capital market do not necessarily have the requisite track record, or the financials, to qualify and list on the markets, at least not in India. But what they do have is a story to tell, a story that could entice investors to pick up a stake based on their future projections.

Walmart-owned e-commerce major Flipkart is exploring a US listing via a SPAC merger, toying with an expected valuation of USD35 billion. Automobile marketplace Droom plans to list on the Nasdaq in 2022.

Online insurance platform Policybazaar proposes to list this year with a valuation upward of USD3.5 billion. Softbank-backed online grocer Grofers is reportedly in talks with Cantor Fitzgerald’s SPAC as it eyes listing in the US.

Food delivery aggregator Zomato is looking to raise `82.5 billion (USD1.1 billion), while new age logistics major Delhivery is vying a valuation between USD3 billion and US$4 billion through the IPO route.

There are 434 SPACs listed on US bourses with cash to the tune of almost USD139 billion, according to SPAC Research, a market intelligence provider for US-listed SPACs. As they run against the clock seeking acquisition targets, and with few feasible opportunities available in the US, many of these blank cheque companies are targeting Asia.

“India has become a veritable hunting ground for US-listed blank cheque companies,” says Akila Agrawal, partner and head of M&A at Cyril Amarchand Mangaldas (CAM) in New Delhi. India has numerous growth companies that are viable targets, she tells India Business Law Journal.

In February this year, pure-play renewable energy producer ReNew Power announced its plans to go public through a SPAC merger at an enterprise value of USD8 billion. The transaction is expected to close in the second quarter of this year, and is backed by Silicon Valley venture capitalist Chamath Palihapitiya.

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