Monday, July 16, 2007

Leave the barn door open

Recently Deepak Parekh cautioned investors against the increasing trend of setting up India focused Special Purpose Acquisition Companies (SPACs) for raising funds on the AIM. After all round-tripped liquidity has always been scorned at and is not new to stock as well as realty markets in India. It's good to keep a watch always over the nature of money that's coming in. We don't want drug money laundered here.
But that's what it should be, a watch. Not blocking entry for legitimate portfolio investments where we need them badly. Wealthy portfolio investors round-trip investments because the door is bolted from inside. Why not leave the barn door open for funds to come back to, say, fix our infrastructure? Regulators like SEBI should focus on veracity and completeness of disclosures with an eye on the source and end use of funds. If the purpose is served well, let them take some tax benefits by all means, who cares. Let Funds come in initially with accredited investors who know what they are letting themselves in for. If that works well, broaden the investor base by allowing retail to join in.
Regulated or not, smart money will always chase opportunity. You can keep watch, but do just that. Don't go for their jugular....That said, already there are several active India focused SPACs - that don't have a web presence. I am linking their SEC filings that are available for reference - East India Company Acquisition Corp [regd], Global Services Partners Acquisition [GSPAC] [EDGAR], Millennium India Acquisition Company [EDGAR] and Phoenix India Acquisition Corp [EDGAR]
Markets thrive on liquidity – never choke them… We've just gotten rid of that habit. Don't hurry to get it back...

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