Don't Get Whacked By India SPACs

MUMBAI - Global investors may want in on the India story, but market professionals here are voicing concerns over a rising number of speculators in the U.S. and U.K. who are raising funds through specialized investment vehicles without strong business plans for how to make use of the money in India.

Special-purpose acquisition companies, or SPACs, are essentially blank-check entities with no operations — they go public with the promise to investors that they will use the money they've raised to acquire or merge with another company.

There are an estimated 10 India-dedicated SPACs listed mainly in the U.S. and U.K. that have raised funds ranging between $350 million and $500 million to acquire companies here.

“Is India going to get whacked by SPACs? Piggybacking on the red-hot M&A wave that India is currently riding on, I believe it’s only a matter of time,” HDFC Bank Chairman Deepak Parekh said at a conference this week. M&A volume so far in 2007 has already hit an annual record of $50 billion; Parekh believes the total will surpass $100 billion by the end of the year.

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