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Bar & Bench spoke to Cyril Shroff, Managing Partner of the Mumbai office and National Capital Market head of Amarchand on his views about the changing trends and reasons for the firms dominance. This conversation is an excerpt of the detailed PDF report. To download click here.
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.
NHPC and Oil India which were both Government transactions, required several years to prepare these companies and work on documents which would have fair disclosure on these companies. They were extremely challenging and complex. We also advised on India’s first issuance of NCD plus warrants issuance through the QIP route by HDFC. We were also instrumental in assisting companies such as Suzlon and Subex to restructure their foreign currency convertible bonds, which were the firsts of its kind.
Managing Talent and work?
Whilst we believe our experience and depth of our team is sufficient to cope with the demands of a recovering market, exciting and experienced talent who can add value to our existing strength would always be welcome. In a nutshell, our focus is predominately on organic growth and to a lesser extent on inorganic growth.
There was a trend, a couple of years ago of these lawyers moving to international law firms. The financial turmoil of the last year has seen a number of Indian lawyers return to the fold. Your comments on this trend across the Indian legal market in general.
We have also experienced a trend of lawyers trained by us or otherwise seeking to move back to Amarchand after having spent a few years in international law firms. We believe that our experience is reflective of the trend being experienced by the legal industry as a whole. Anecdotally, the number of Indian lawyers seeking to move back from US and UK is far greater in portion from those in jurisdictions such as Singapore and Hong Kong and we believe this trend will continue in short term. After all there is no place like home.
To download the PDF report covering Indian Law Firms, International Legal Counsels, Top 25 IPO transactions, Interviews with Cyril Shroff, Neeta Sanghavi, Manoj Bhargava and Rajiv Gupta and a detailed table of capital market rankings Click Here