SPACs explained: India’s regulatory position and future outlook

Unlike traditional IPOs, SPACs offer a faster and more flexible route to public markets, enabling private companies to negotiate valuation and transaction terms directly with the sponsor rather than relying solely on market‑driven price discovery. This approach can reduce exposure to prolonged regulatory timelines and adverse market volatility. Consequently, the SPAC model is particularly attractive for high‑growth companies, especially in emerging or capital‑intensive sectors, which may not satisfy conventional IPO eligibility or profitability thresholds at the time of listing. In the United States, SPACs operate under a mature regulatory framework governed by the Securities Act of 1933 and the Securities Exchange Act of 1934. In United States SPAC files for its IPO, offering units consisting of common shares and redeemable warrants, with proceeds held in a trust account for redemptions, a business combination, or liquidation.

In contrast, the Indian regulatory landscape for SPACs remains underdeveloped. The Companies Act, 2013 creates significant obstacles, for instance Section 248 provides for striking off of companies that do not commence business within one year, which conflicts with the extended timeline required for a SPAC to identify a target. Additionally, Section 4(1)(c) mandates that the memorandum of association state specific objects, making it difficult for a SPAC to comply with the same. The SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 further impose stringent eligibility criteria under Regulation 6(1), including requirements for net tangible assets, profitability track record, and net worth, which a SPAC cannot satisfy. As a result, SPAC IPOs and listings on Indian exchanges are currently not permitted.

While SEBI had issued a consultation paper in March 2021 to explore the introduction of a SPAC framework, but as of 2026, no comprehensive regulations have been notified for domestic markets. A limited window, however, exists in the International Financial Services Centres Authority (IFSCA) framework. The IFSCA (Issuance and Listing of Securities) Regulations, 2021 permit SPAC IPOs and listings within GIFT City, subject to specific conditions relating to minimum issue size, sponsor obligations, redemption rights, and trust account mechanisms. Even this route requires compliance with multiple statutes, including the Companies Act, FEMA, and tax laws, and full operationalization may need further legislative amendments.

Indian companies seeking public market access through SPACs often pursue overseas routes. An Indian target may enter into a merger or acquisition with a foreign SPAC, typically a U.S.-listed entity, through share swaps or schemes of arrangement approved by the National Company Law Tribunal (NCLT). Such cross-border transactions must comply with the Foreign Exchange Management Act, 1999 (FEMA), Reserve Bank of India guidelines on overseas investments, and relevant SEBI takeover regulations where applicable. While enabling provisions exist under Section 23 of the Companies Act, 2013 for direct overseas listings, detailed frameworks are still evolving. Past transactions, such as ReNew Power’s NASDAQ listing via SPAC merger (see news report by Money Control here), demonstrate the practical viability of this route despite regulatory complexities.

In India, the cautious stance reflects concerns over protecting retail investors in a market characterized by higher volatility and relatively lower institutional participation. For sponsors and target companies, navigating SPAC transactions in the Indian context involves addressing dilution risks, fiduciary duties under corporate law, competition law implications, and tax considerations. Overseas SPAC deals provide Indian growth-stage companies with quicker access to global capital but entail currency risks, post-listing compliance burdens, and multi-jurisdictional approvals.

While SPACs continue to represent an innovative capital-raising mechanism in mature markets like the USA, in India, the framework remains nascent, with meaningful domestic adoption possible only through GIFT City or overseas structures. Balanced reforms that promote innovation while safeguarding investor interests will be critical for unlocking the full potential of SPACs in Indian corporate landscape.

[The author is an Associate in Corporate and M&A practice at Lakshmikumaran & Sridharan Attorneys, Hyderabad]