MUMBAI, Dec 20 (Reuters Breakingviews) - India’s most valuable startup is presenting New Delhi with a $48 billion problem. Officials are yet to allow firms to list directly overseas, so online educator Byju’s is mulling a debut in New York read more by way of a merger with one of the special-purpose acquisition companies sponsored by former banker Michael Klein. If allowed, the workaround opens a regulatory grey area, similar to the one China’s technology giants exploited and are now paying the price for. SPACs are queuing up to help Byju’s skirt rules which ban locally incorporated companies from listing certain types of securities, such as depositary receipts, in foreign markets before they go public in India. Officials said in early 2020 that they would allow direct overseas listings, and later considered requiring companies to list shares in India within three years. The rules have yet to be finalised and there’s little clarity on the path ahead. India’s dithering may be inspired by a strong desire to keep homegrown champions at domestic boards. Big listings, like those this year by Paytm owner One 97 Communications (PAYT.NS), online beauty shop Nykaa (FSNE.NS) and food delivery giant Zomato (ZOMT.NS), help deepen the capital market. Even greater wins may come if Reliance Industries’ (RELI.NS) digital business, Jio Platforms, and Walmart’s (WMT.N) payments app, PhonePe, offered shares in Mumbai. Authorities are caught in a hard place. It would be messy to thwart a Byju’s merger at this stage or once anything is formally announced. But allowing companies to get creative might backfire down the line. Take China’s Didi Global (DIDI.N), for example. For years, Beijing has turned a blind eye to the complex offshore structures used by the ride-hailing app and peers to circumvent foreign investment restrictions and list abroad. The workarounds are now attracting intense scrutiny. Concerns about data security have also prompted $30 billion Didi to move to delist its New York shares read more barely five months after going public. New Delhi’s final position is unlikely to be as strict as Beijing’s. And the growing strength of Indian equity markets may be enough to entice many mid-sized companies to stay at home rather than risk becoming orphan stocks overseas. But for a large company with considerable international revenue, such as Byju’s, a U.S. debut makes sense. India’s regulatory cloud risks turning into a storm. Follow @ugalani on Twitter CONTEXT NEWS - Online educator Byju’s has an offer from one of the special-purpose acquisition companies sponsored by former banker Michael Klein, valuing the Indian startup’s equity at $48 billion, according to a person familiar with the matter. - Bloomberg reported the news first on Dec. 16. It said the companies were in advanced discussions for a deal, noting that the startup held talks with several potential SPAC partners and is farthest along in working out an agreement with one of Klein’s Churchill Capital Corp SPACs, citing sources. - Byju’s may yet decide to go public in India, via a traditional initial public offering.