Capital Market Trends

The capital market practice in India has changed dramatically in the past 5 years and is possibly poised on the threshold of the next growth phase. India’s overall resilience to the financial recession and the responsiveness of the various regulators to the financial downturn have contributed to confidence in the Indian capital markets. SEBI has taken a proactive role in streamlining disclosure requirements to international standards. Even its review process is focused on substantive review of key aspects such as accounting MD&A (Management, Discussion & Analysis), rather than merely ensuring form compliance. All these factors have all contributed to larger public offerings, a greater number of capital market transactions and buoyant capital markets in India. The next 5 years promise more of the same – i.e., an ever-active securities regulator focusing on key aspects such as materiality levels in disclosures, promoting new capital raising instruments such as Indian depository receipts and also potentially a better and deeper debt market.

On the company front, we see certain sectors leading the charge for capital raising such as infrastructure, retail, education, information technology, renewable sources of energy and life sciences, and at a macro level professionally and independently managed companies backed by private equity players.

Capital markets were relatively quiet in 2008. What action did Amarchand take to counter the recession on the business development and associate management fronts?

The quiet period in 2008 gave us an opportunity to introspect, focus on our strengths, innovate on new opportunities for development by going back to the drawing board. We took various steps including being the first to look at alternate issuances such as issuance of differential voting shares by Tata Motors Limited, issuance of India’s first Indian Depositary Receipt, we were one of the leaders in advising various Indian companies in relation to buyback and restructuring of foreign currency convertible bonds such as those of Suzlon and Subex. During this period we also advised on a few capital rising offerings such as the rights offerings by Hindalco, the IPO of Mahindra Resorts. We also effectively utilized the time to broad-base the skill sets of our capital markets team in areas complimentary to their core practice. We trained our lawyers on financial statements and basics of accounting, we cross staffed across teams (such as real estate, M&A, private equity etc.). These steps helped us to be first off the blocks when markets changed from May 2009.

Capital markets practice has always been considered to be a large firm domain. There has been a sudden influx of small and mid-sized firms entering this area. What does this trend indicate?

In India, there have always been a number of small and mid size firms practicing capital markets. In order to capitalize on the benefits of having a robust capital market practice such as market awareness, publicity and relationship building, small and mid size law firms have increased their presence organically or inorganically. Also, you need to keep in mind the fact that the Indian capital markets receives a lot more publicity now than what they did a few years ago, and therefore there is a trickle-down effect on the various individual transactions and their advisors. This is also an indication of the buoyancy of the Indian capital markets, as a whole. The large firms will continue to advise on the complex, path breaking and first of a kind transactions, leveraging on their depth and experience.

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