SPACs - Enron Like Companies

Deepak Parekh, Chairman HDFC and IDFC group, has expressed concerns about companies raising hundrerds Millions of Dollars abroad using Special Purpose Vehicles and Special Purpose Acquisition Companies without any business plan or core strategy.

Mr. Parekh said,

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. 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. 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?

Most of the shady companies raising through this means are in the Real Estate Business in India. If you haven't seen the movie, Enron, then you must check it out because it was the biggest corporate bankruptcy in the US.