Capital Markets Half-Yearly ipo-qip Report April to September 2010

Capital Markets Half-Yearly ipo-qip Report analyses India’s largest Coal India IPO along with a conversation with Prashant Gupta, Partner at Amarchand Mangaldas and Biswajit Chatterjee, Legal Director and Capital Markets Head at DLA Piper..Market View and Law Firms.The Coal India IPO, which was oversubscribed by 15 times at the upper band of Rs. 245, ended with a 43 percent gain at Rs. 349 a share on the Bombay Stock Exchange when listed. The IPO that opened on October 18, 2010 had mobilized Rs. 236,000 crore ($52.4 Billion), over 15 times the target of Rs. 15,500 crore ($3.4 billion). Some media reports indicate that the amount of money that was invested into in this IPO in a span of four days is more than last year’s GDP of about 140 countries..Coal India’s IPO is the biggest in India’s capital market history and will surpass Reliance Power’s $3 billion (Nearly Rs. 13,500 crore) listing in 2008. After the recession year of 2008, which had its effect till mid 2009, the capital markets have bounced back in 2010 with several companies aggressively positioning themselves to attract public equity. Ashurst’s Partner Stuart Rubin speaking after the completion of the IPO said, “Taking public a company that itself constitutes one of India’s most critical industries is no easy feat, particularly on the timeline set for this transaction. The number of constituencies with an interest in the transaction was incredible. The credit goes to the banks, and the remarkably successful execution of this deal demonstrates their commitment to the Government of India’s disinvestment programme”. At the end of trading on November 5, the Sensex touched 21,000, a number according to many is an overheated market..As compared to the half yearly period of 2009, the numbers of IPOs in the 2010 period has more than tripled from 23 to 73. Add to that the Sensex touching a 32-month high and crossing the 21,000 mark, low-key celebrations are back on Dalal Street. With the Indian capital market taking steady strides, this comes as good news to Indian law firms who saw business dwindling to a large extent after last year’s economic collapse..Rankings.Indian Law Firms.Amarchand recorded the highest number of capital market transactions and was ahead of all other law firms as it acted as the legal advisor in 29 IPO / QIP transactions. The biggest IPO player in this section was again the capital market team at Amarchand Mangaldas. A surprising entry in this list is of Delhi based law firm Zenith India Lawyers who advised five companies in their offerings. A cursory look at the data compiled indicates Zenith to be the go to firm when it comes to smaller IPOs. The law firm saw a mix of agro, finance and infrastructure sectors and bagged nearly 5 IPOs in the second half of the financial year..Table 1: Top Indian Law Firms.One of the other interesting trends is the list of newer law firms in the capital markets practice. These smaller firms exclusively handled the smaller and midcap fund raising. 36 law firms or lawyers represented nearly 100 companies in their IPO / QIP transactions and it was a first time capital market transaction for most of them. Capital Markets transactions have been exclusively handled by large law firms and this is the first time, several other law firms are expanding their practice areas to include the IPO / QIP transactions..On the other side, the Underwriters have strong relationships with top three law firms and continue to give them business. Speaking to a General Counsel who did not want to be named, he said “The reason why we use the top three or five law firms is to de-risk our regulatory exposure if we may have. Since the banks do not have serious concerns over the quantum of fee charged by the law firms, we tend to go with these law firms. These days, we are seeing some young firms do some phenomenal work and I will not be surprised if we move from large law firms to medium size law firms where the Senior Partner attention to the transaction is at the highest”..Conversation: Prashant Gupta, Partner, Amarchand Mangaldas (New Delhi).What are the statistics of AMSS Capital Markets practice this year? And between April to September?.From April to September, we have completed the filing of 18 offer documents with SEBI for IPOs and FPOs. In addition, we have also completed the listing of about 13 companies in India. We have also worked as sole Indian counsel on the Essar Energy plc IPO and listing on the London Stock Exchange, as counsel to the underwriters on the IPO and NASDAQ listing for Makemytrip, and counsel to Standard Chartered plc in relation to the first IDR issue in India. We have also worked on a significant number of QIPs, including large deals for Adani Enterprises Limited, Tata Motors and IDFC..What is AMSS’s strategy on the Government IPOs? AMSS is doing a whole lot of deals, why is it still bidding for Government IPOs which are fairly in low terms of value?.Government IPOs/FPOs are very prestigious transactions and we participate in the bidding process of these transactions jointly with international law firms. However, as you note, due to L1 rules, it is difficult to successfully win all mandates, although we have already worked on 6 Government deals since January 2010, including NTPC, PowerGrid, Hindustan Copper, Shipping Corporation, REC and Coal India (last two as counsel to the underwriters)..Are there any trends that you are observing which you haven’t seen or you saw in 2007 or unlike 2007, you are seeing something else?.As compared to 2007, we believe that there are a much larger number of quality PE/VC backed companies that are now coming to the market. These are professionally managed companies with first generation entrepreneurs and not necessarily family driven and controlled. We think this trend will continue..Has there been an organized increase in the IPOs from April to September or just been a ridiculous rush of IPOs?.This is market driven to a large extent. While there are a number of IPOs in the commodity and infrastructure sectors, there have also been a number of new sectors that have come to market and have seen good response from the investors (such as Jubilant Foodworks, SKS Microfinance, Intrasoft Technologies)..International Legal Counsels.Jones Day continued its good run on the Indian capital markets post Partner Manoj Bhargava’s promotion last year. However, the real surprise this half was DLA Piper who has bagged 9 representations. DLA Piper bid for most of the Government disinvestment program along with Luthra..Table No. 2: Top International Legal Counsels.Conversation: Biswajit Chatterjee Legal Director and Capital Markets Head, DLA Piper (Singapore).Last year, DLA Piper did not feature as the international legal counsel in a single IPO. This year the firm is one of the leaders with 9 IPOs so far. What accounted for this change?.The India focused capital markets team at DLA Piper was set up last year and we believe we have developed a strong profile within a relatively short period. I believe it was a combination of various factors – a commitment to quality and efficiency, understanding client needs, a committed team and the firm’s support for the development of a creditable India practice. Steve Peepels (head of the US Capital Markets – Asia) and I have both worked extensively in India. We benefited from a strong market in the second half of 2009 and closed several QIP transactions, and several of the IPOs on which we commenced work last year were filed this year. We have actively focused on a mix of private transactions and government disinvestments across various industries and sectors to strengthen the firm profile in India..The firm advised on the biggest IPO to hit the Indian markets ever, Coal India Limited. Talk us through the process on advising on this landmark IPO..The Coal India IPO is one of the most high profile transactions from India in recent times. It involved a lot of hard work from the team, efficient execution and coordination with the other advisors – investment banks, other legal teams, auditors and industry experts. The company’s massive operations, competing interests of various stakeholders in the industry and in the transaction, regulatory issues, the size and profile of the deal, and the tight timelines, all contributed to the intensive experience..Which capital market transaction was the most challenging? .Certainly the Coal India IPO..What are your predictions for the Indian and global financial markets for the second half of the current financial year?.It is difficult to say – there’s expectation of some pull back in the markets towards the end of this year, given the significant surge lately. We’re all hoping for a stable market for the next several months that will make deals possible. A number of significantly large Indian transactions are expected to hit the markets in the second half of this fiscal – it will be interesting to see the effect on investor appetite in India and for Indian companies..How has the DLA Piper team reacted to the flurry of IPOs in the Indian market?.We have significantly expanded the capital markets team and continue to add to the team..India strategy – How aggressive is it. Also, you have been responsible in getting the ball rolling as far as the India market is concerned – Your views on the long term India story..As a firm we have closely followed the India market in the last couple of years – there’s a definite buoyancy and confidence among Indian corporates expanding globally across various sectors – including natural resources, manufacturing and services. We are committed to developing a strong India practice with a focus on long term relationships. We have in the past year advised various Indian corporates, as international counsel, on several significant capital markets, corporate, finance and outsourcing transactions, including in Europe, the U.S. and the Middle East, and we continue to coordinate our efforts across the firm to further strengthen the DLA Piper brand in India.