[By Shaurya Jha]
The author is a student of Hidayatullah National Law University, Raipur.
Introduction
With the Indian Space Industry’s expected target to reach $40 billion by 2040, funding roadblocks stand as the major hurdle. Conventional financial mechanisms are misaligned with the commercial requirements of space ventures. Bank loans require collateral and predictable income, constraining early-stage space startups. Venture capital, on the other hand, demands short-term to medium-term exit (5–7 years). This has necessitated the industry to react with the accelerated usage of Special Purpose Acquisition Companies, or SPACs – a mechanism that facilitates the company to go for a public listing and fundraising even before the acquisition target is recognized. The end goal of a SPAC is to capitalize on shareholders and PIPE funding to purchase an operating company, which has marked a watershed phase in modern corporate capital acquisition, breaking outside conventional methods like IPOs.
SPACs, informally known as “blank-check companies,” are publicly listed entities created entirely to converge with or take over a pre-existing corporation, thereby aiding its swift transition to public trade venues. Space technology has surfaced as an alluring industry for cooperatives focusing on developing satellite constellations, reusable rockets, and space travel industry services that conventional funding avenues falter to provide. Notable space technology SPAC transactions include Virgin Galactic, the first publicly traded commercial spaceflight company, which went public via a $1.5 billion SPAC merger in 2019. Similarly, Rocket Lab’s SPAC merger underscored the sector’s promise, enabling the company to expand its small satellite launch capabilities. However, India lacks regulations dedicated to SPACs, resulting in uncertainties for the investors of space-tech markets, and the current legislation makes the process of capitalizing on the financing model difficult due to the imposition of compliance barriers.
Through the means of this article, the author analyses the convergence of SPACs and Space technology. Subsequently, the author deliberates on the legal regulatory dimensions of space technology SPACs in the Indian context and the challenges and risks of space technology SPACs in India, and the author concludes the article by discussing the future of SPACs in India’s space industry.
The Intersection of SPACs and Space Technology
The concept remains to be evolving in India, despite gaining global traction, India is yet to develop a definitive legislation for SPACs within concrete guidelines. The vacuum further limits the Indian startups, specifically the capitally intensive ones, from exploring this alternative route to markets.
Unlike traditional IPOs, SPACs enable privately listed companies—particularly those in fledging industries—to circumvent lengthy supervisory scrutiny and facilitate significant funding within months. In 2020 and 2021, SPACs collectively raised over $160 billion globally, with several transactions targeting innovative industries such as the space sector. The SPACs are now venturing into innovative sectors, with space technology being a key area of focus. For instance, Lynk Global, a company specializing in satellite communications, announced its merger with Slam Corp, a SPAC. The convergence, valuing Lynk at $800 million, aims to finance the low earth orbit satellite constellation. The space sector has its unique impediments, like substantial capital requirements coupled with long development deadlines, thus making SPACs an ideal financial mechanism to close the divide between pioneering cooperatives and funding ecosystems in India. These deals reflect the rising investor confidence in private space companies and highlight SPACs’ role in democratizing access to the space economy. The promising convergence of SPAC and the Space technology of India provides a humongous opportunity for technological advancement and growth. SPACs, which provide an efficient process for private cooperatives to be open to the public or civic and access capital, have been and will be pivotal in developing the global space industry. Companies such as SpaceX have demonstrated the commercial viability of reusable rockets, while satellite ventures promise to bridge the global digital divide. SPACs enable these firms to secure the necessary capital to scale operations and innovate rapidly. As projected, the space economy is estimated to reach $ 1 trillion by 2040, facilitated by space-based internet systems, satellite technology, and even lunar exploration.
The Indian space economy targets a fivefold expansion in the next two decades; harnessing the prowess of SPACs could accelerate the transition to a full-scale commercial enterprise, strengthening global competitiveness. SPACs allow the private Indian space-tech corporations to step into the humongous market, making sure that the Indian space-based industry is suitably financed so that India remains at the place of prominence in space exploration. As the aspirations mature, the regulation of SPACs should not be assessed economically but legally as the determinant of their success.
Legal and Regulatory Dimensions of Space Technology SPACs in India
In defiance of the global acceptance, the regulatory environment of India persists to be limited. In contrast to major countries like the United States of America, where SPACs have been accepted as a major tool of financial transactions.
Despite the readiness around investments driven by SPAC in the space sector, the Indian Investor continues to face intimidating difficulties due to the lack of a formalized and dedicated framework which engender legal roadblocks for the space-tech corporations willing to go public via SPAC.
Assessing Section 26 of SEBI ICDR Regulations, 2018, which places a requisite of exhaustive financial disclosures as well as past earnings, presents an overwhelming challenge for space-based startups as unlike the conventional commercial corporation, these startup make take years to make the transition from prototype to product due to the long term R&D investment with limited immediate funds, making the adherence to the IPO eligibility, counterproductive. \
While Regulation 2(s) of the International Financial Services Centres Authority (Issuance and Listing of Securities) Regulations, 2021 defines a SPAC and allows SPACs to be listed on IFSCs, it lacks the sectoral guidance for the capital-intensive sectors. In defiance of a consultation paper issued by SEBI, no formal rules have yet been notified. Absence of such provisions prevents the alignment with the upfront R&D investment and extensive development cycles of commercial space in India. By contrast, in major jurisdictions such as the United States of America, the Securities and Exchange Commission operates as an independent agency, governing the SPAC, which is presided over by the regulations established in the security laws, which holds the say over the disclosure of material risks, financial forecasts, and sponsor incentives as well.
For the Space-concentrated SPACs, alignment with the legislative and regulatory bodies which is inclusive of the Federal Communications Commission (“FCC”) for satellite launches is mandatory. Furthermore, international treaties such as the Outer Space Treaty are considered which restrict the claim of national governance in the Res Nullius jurisdiction of the space and prescribe the liability of private players as the legal complexities increase in involving multinational cooperatives and their transactions.
Furthermore, the Indian Draft Space Activities Bill, which is ready and currently undergoing the approval process and is expected to cover the national and international obligations and clarify the damages incurred by the space corporations, lacks clarity on commercialization and private investments, which further complicates the establishment of SPACs. The establishment of structured policies inspired by Singapore’s SPAC regulation could strengthen and provide the private sector with a clear path for raising funds efficiently. Additionally, the SEBI Alternative Investment Fund (AIF) framework does not capitalize on the introduction of SPAC specific which could facilitate the security of the investors and develop a structured process for mergers and acquisitions for space-tech corporations enhancing regulatory certainty.
Rectifying these provisions is of greatest importance for accommodating SPACs preserving the confidence of the investor and ensuring transparency which results in the allowance of the flexibility of high-reward sectors such as space technology.
Conclusion: The Future of SPACs in India’s Space Industry
India’s space sector stands at the cliff of an unparalleled transformation, with SPAC arising as a propellant force for accelerated growth. The government’s recent steps towards privatization, aided by initiation of the Indian National Space Promotion and Authorization Centre (IN-Space) underscore a momentous shift towards the contributions of the private sector in space innovation. The enactment of comprehensive SPAC regulations could bring domestic space startups into a global sphere and also unlock a vast reservoir of foreign investments. To harness the adroitness of SPACs, India must undertake a comprehensive framework that facilitates an ecosystem of investor security and innovation. Implementation of an extensive SPAC regulating policy under SEBI would allow necessary clarifications on post-merger compliance and financial disclosures.
Moreover, the emergence of space tourism as a viable frontier for the commercial sector, developing the space-tourism ventures should include mandatory pre-de-SPAC technical vetting by In-SPACe, linked with capital mechanisms and safety benchmarks. Post-merger, the codification of SEBI’s intervention and safety audits should be ensured for continued public trust in high-stake missions.
In conclusion, the merger of SPACs and space technology indicates a watershed moment in aerospace capitalization, making the way for a new generation of celestial exploration for the space industry. SPACs may go beyond the terrestrial financial constraints and serve as the anchor for realizing the aspirations of humankind for the interstellar.