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In this interview with Bar & Bench, Gupta shares his predictions on the India market, sponsored ADR programs and the liberalisation of the Indian legal market.
Anuj Agrawal: In 2008, you wrote about the peculiarities of the Indian capital market, citing elaborate diligence procedures in the real estate sector. Do you think the problem of titles has decreased since then?
Rajiv Gupta: Real estate title continues to be an issue in India, exacerbated by the non-availability of title insurance. Real estate transactions still require detailed diligence procedures for title searches by specialist real estate counsel. Although there have been fewer IPOs and offerings by real estate companies in India in recent years, REIT offerings may face some of these issues.
SEBI’s Listing Obligations and Disclosure Requirements Regulations, 2015, which became effective in December 2015 was a very positive development for international and Indian investors, particularly in the areas of real estate and litigation disclosure as these regulations introduced a materiality threshold for disclosure in these areas.
Anuj Agrawal: Do you see Indian companies using the level one sponsored ADR route to raise capital?
Rajiv Gupta: Although a large number of Unsponsored ADR programs were filed by various depositaries since the Ministry of Finance and the RBI implemented the recommendations of the M.S. Sahoo Committee to permit OTC depositary receipts for Indian-listed shares, no ADRs have yet been issued under any of them.
I understand that further clarification is still awaited on certain operational issues. If these Unsponsored ADR programs become operational, I do expect many companies to sponsor these programs and turn them into Level 1 Sponsored ADR programs.
Level 1 sponsored ADR programs are non-capital raising, and are generally used to provide liquidity for the shares in the US OTC market. A Level 1 Sponsored ADR program provides better control to a company over the program and better visibility with its investors.
Anuj Agrawal: Are you seeing more India interest in 2016? Any specific sectors?
Rajiv Gupta: India continues to be a very attractive market for investors globally, as is evident from the robust M&A and PE activity in the recent months. Even the global capital market decline in the first quarter of 2016 has had less of an effect on India than we have seen in many other jurisdictions.
We expect to see continued significant interest in India, and anticipate continued activity in Indian capital markets. There were some good IPOs in 2015 that generated a lot of interest globally. For example, we advised on the Indigo Airlines IPO that was very well received by the global investors.
While the India interest has touched a very broad set of industries, particularly hot sectors include technology and e-commerce, transportation & logistics and pharmaceuticals. There is also a significant interest in InvITs (Infrastructure investment trusts) which is a new product and in the insurance sector.
Anuj Agrawal: You worked on MakeMyTrip’s listing on NASDAQ. Do you think Indian startups will look at listing overseas?
Rajiv Gupta: Yes, we advised MakeMyTrip on its very successful Nasdaq listing in 2010. However, not being able to list an Indian company directly overseas was an impediment. Now that direct overseas listings by an Indian company without requiring listing in India is permitted, overseas listing has become an easier alternative to listing in India.
This is a particularly attractive option for companies which are in sectors such as technology and e-commerce. There are a number of companies in this sector which expect to IPO in the next few years and I expect them to strongly consider a US listing.
Anuj Agrawal: In a 2010 interview, you mentioned the trend of Indian lawyer’s returning to the country, often as in-house counsel. Does this still hold true?
Rajiv Gupta: I expect the trend of lawyers overseas returning to India to continue. The Indian legal market values, without overvaluing, experience obtained by Indian lawyers overseas and professional opportunities continue to grow to pursue rewarding and challenging careers in India, both in private practice and in-house.
Anuj Agrawal: Is Latham open to hiring students from Indian law schools?
Rajiv Gupta: Latham is committed to hiring the best associates globally, including from India. As with other international law firms, many of the Indian law school graduates who have joined our firm have followed the same path as I took by pursing an LLM overseas after graduation in India, although this is by no means a requirement.
Anuj Agrawal: What are your thoughts on family-run law firms?
Rajiv Gupta: The key to success for any law firm is the professional management of the firm and that the key contributors are rewarded in line with market, regardless of whether the firm is family owned or not.
Anuj Agrawal: Entry of foreign law firms – Any thoughts on when this would happen?
Rajiv Gupta: This has been and continues to be a subject of significant interest. For the past many years, I have heard that the entry of foreign law firms is “two years away”! While I understand that discussions within the Indian legal community continue on this topic, there is currently no clear guidance on timing.
Anuj Agrawal: Can you tell us a bit about Latham’s India plans? Both long and short term.
Rajiv Gupta: We are committed to maintaining our market leading position for quality international legal advice in India. In the short term, we expect to increasingly leverage Latham’s specialized expertise in areas such as private equity and restructurings.
In the long term, we expect that increasing international business by our Indian clients as well as continued interest in India by our international clients will result in more opportunities for challenging and rewarding work for our lawyers.