Lets talk #SPACs

SPACs have become hugely popular as an easier route to an IPO in the US.

Online grocer Grofers was in news last week for discussing a listing through a SPAC (special purpose acquisition vehicle)

But with over half a dozen Indian startups talking about IPOs, why aren't more of them exploring SPACs?

1. Indian companies registered overseas, especially in Singapore, such as Flipkart, Grofers, Pinelabs, and Inmobi, have a better shot at a SPAC listing than those incorporated in India. 
2. Last year, companies raised about $83 billion in the US from 247 SPAC listings via reverse mergers, acquisitions, or share swaps.
3. In India, for all three routes, companies would need approval under foreign exchange control rules (NDI and ODI) and companies law, and in some cases, from regulators such as Sebi and RBI. (for a few, also sectoral regulators and NCLT ).
4. Also, lawyers say that for a cross-border traditional merger involving an Indian company getting acquired by a US SPAC, the timeline from the intent to execution exceeds 18 months, which is the max time mandated from NASDAQ
5. “So in India, the feasible option you may have is an acquisition or a share swap (due to us stock exchange rules). If you’re in Mauritius, or are Singapore-based, you have more options including a merger, which is faster, and more comfortable from the SPAC investor,” a lawyer told www.the-captable.com.
6. Another issue is tax incidence. Since a transfer to a SPAC indicates a change in shareholding, there is capital gain tax whether or not a shareholder cashes out. This is for both India- and Singapore-registered companies. 
7. With Indian companies, trading in those SPAC shares can subsequently attract more local tax implications as well. These things have an impact on how big a US SPACs market actually exists for Indian companies.
8. A few Indian entities including Videocon and Yatra have implemented certain variations of SPAC models. Now, ReNew Power is eyeing a potential SPAC listing, as is Grofers, according to recent reports. 
9. But considering about 300 SPACs are currently seeking deals with around $90 billion in cash, according to a WSJ report, not many Indian companies are queuing up.

Thank you for reading.

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