InvestorQ : What are the advantages of taking the SPAC route? Do you see any key risks to using the SPAC route?
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What are the advantages of taking the SPAC route? Do you see any key risks to using the SPAC route?

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Niti Shenoi answered.
5 months ago
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SPACs or Special Purpose Acquisition Companies are useful to the investors in the SPAC and also to the merger targets that want to get listed on an international stock exchange. SPACs provides an easy and profitable investment opportunity as many of these target companies give good returns on listing. Normally, SPACs are floated by persons with domain skills and that is when the knowledge levels work in favour of investors in the SPAC.

We now look at the impact on the target company. The target company merging into the SPAC, has major advantage because the listing process is substantially simplified compared to the traditional IPO process since the listing compliance requirements are much lower. By merging with the SPAC that has already gone through the IPO process, the target company can get listed on a global stock exchange in a shorter time span.

Can this SPAC model also be used to list Indian companies in India? To begin with, it would be more useful to Indian companies with a global reach looking to list directly on the US through the SPAC route. It can help them avoid the elaborate listing process. For it to spread in Indian markets, a lot of local regulations may have to be changed.

There are some concerns too. For example, Indian regulators are averse to the term, “Shell Company” and that poses a problem. Also, the Companies Act 2013 requires that business must start within 1 year of incorporation. That could be a roadblock for Indian SPAC structures as typical SPACs take 2-3 years to acquire the target company. SPAC has caught on in the US. India must hitch on to it. 

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