Blank-cheque firms worrying: Deepak Parekh

HDFC chairman Deepak Parekh today voiced concern over special purpose acquisition companies (SPACs) raising capital overseas for investment into India without any specific strategy or business plan.

"They are essentially blank-cheque firms which do not have a strategy or a business plan... There are at least ten India-dedicated SPACs that have raised between $350 and 500 million and are now on the prowl to acquire Indian companies," he said during a CII seminar on London's Alternate Investment Market (AIM).

This new trend would gain momentum... People setting up SPACs should have credibility and a clean track-record, Parekh said.

"This is just the beginning of sophisticated investment vehicles but investors must realise that the India party with extraordinarily high returns cannot go on forever," he said.

Citing examples of the acquisition of Mars Restaurants and a broking company in Delhi by SPACs, Parekh said "it is easier to raise money because of global liquidity and besides, the returns are as high as 40%. But how long will it last?"

Parekh suggested setting up a mini bourse to help small cap companies list and later graduate to bigger bourses.