| HDFC Chairman Deepakh Parekh today cautioned investors against the increasing trend of setting up Special Purpose Acquisition Companies (SPACs) for raising funds on the AIM. |
| SPACs are essentially firms that raise money through public offerings with an objective to acquire small- and medium-sized firms focusing on a particular sector or country. The acquisitions are made within a specified timeframe or the funds are returned to the investors. |
| Parekh, also the chairman of the CII National Council for Infrastructure Development, was speaking at a seminar on "London Listing - Special Emphasis on AIM." |
| "Conventional investment wisdom or perhaps even a pea-sized brain would tell us that you do not hand over millions of dollars to a group of a publicly listed company that does nothing, has no firm business strategy and may never have any assets. Yet the impressive returns of 40 per cent is reason enough for investors to savour SPACs," he said. |
"Clearly, this is just the beginning of sophisticated investment vehicles, but investors must also realise that the India party with extraordinarily high returns cannot go on forever," he said.
"At the same time, we must caution against reaching a pump and dump kind of situation which can undo all the good investor sentiment that has so painstakingly been built up in India." Parekh also questioned the Securities and Exchanges Board of India's (Sebi) restrictive regulations.
