The corporate boardrooms of the Wall Street and the American business media have been talking about Special Purpose Acquisition Companies (hereinafter referred to as “SPACs”) in their day-to-day affairs. Recently, they have become an apple of the eye of America’s corporate domain and have garnered a lot of attention. The SPACs, though in existence since 1990s, have taken the US Market by storm. In the first quarter of 2021, almost USD 96 billion were invested, which surpassed the total capital raised through SPACs in 2020 amounting to USD 80 billion. As of 13th March 2022, SPACs have raised USD 9.6 billion. They have stamped their hegemony in the Wall Street as in 2020 they accounted for 50% of the newly public listed US entities.
It has become a new buzzword in the vocabulary of every prospective investor and they are certainly starting to engage with these companies in order to gain a better return on investment and utilization of the funds for essential measures. Investor optimism is vital for any company to flourish and their consistent belief is the key to a company’s success. SPACs give the investors an opportunity to diversify their investment in a range of industries offering them better terms than a traditional IPO.
India’s quest of becoming a global economic superpower has accelerated in the past decade. The Indian capital markets are flourishing, the investor confidence is at its peak and the policy measures are attractive for increased foreign investment and employment generation. The rise in India’s Purchasing Power Parity (PPP) , accelerating GDP growth and infrastructure capabilities have made India a safe and trustworthy economic haven. One of the key contributors to this growth is the Start-up ecosystem. Over the years, with their increased presence and enhanced capabilities, have steered India to significant growth prospects and SPACs can certainly encourage and boost more entrepreneurs to come up with more such start-ups by enabling access to capital. The author makes an attempt to understand how SPACs can influence the Indian Start-up ecosystem by looking into the opportunities it offers and how SPACs can prove to be an important determinant of success of start-ups in India. The author throws light into the regulatory and tax considerations surrounding the SPACs and also the future of SPACs in becoming the most popular asset class of India Inc.