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Capital markets
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Capital markets

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  • 1. Capital Markets2009-2010ipo-qip report© www.barandbench.com 2Market View and Law FirmsCapital markets in India have been a reflection of the country’s economic growthand development over the last two decades. Bombay Stock Exchange’s sensitivityindex, the Sensex, has become the barometer of the Indian market. Several reportshave been published by leading international agencies on the potential scope of theIndian capital markets, usually referencing the expectation that the Sensex will crossthe 20,000-point threshold by November this year. All these reports have one thingin common – the Sensex is headed upwards and sky is the limit.On the basis of the developments over the last decade, a FICCI – Mckinsey reportstates that the Indian capital market could reach triple its current size by 2020. ABusiness Today report predicts that the Sensex will touch the 1,00,000 point mark by2025. This would mean an unimaginable rally of over 10 times from the level seenjust a few months ago, when the Sensex was toiling below the 10,000-point markafter a meltdown that began in November 2008.The growth in Indian capitalmarkets started in 1991 and hasbeen driven by a number ofregulatory reforms, liberalization,capital control norms and thecontinuous monitoring by theregulatory agencies. Market
  • 2. capitalization of companies hasincreased more than six-fold andtrading value has more than tripled.By 2007, India had catapulted to thesixth position in the global list of countries in terms of funds raised through InitialPublic Offering (IPO). A USAID report on capital markets in 2007 stated that Indiawas able to achieve this position because of a developed regulatory environment,modern market infrastructure, steadily increasing market capitalization andliquidity, the better allocation and mobilization of resources, a rapidly developingderivatives market, a robust mutual fund industry, and increased issuertransparency. Between 2003 and 2008, nearly 285 companies raised capital, of whichnearly 85 companies raised capital in 2007-08 alone. 2007 was by far the best year forcapital markets with the Sensex breaching the 20,000-point barrier and IPOsaccounting for more than Rs. 45,000 crore ($10 billion) of capital raised. However,2008-09 reversed this trend and proved to be a difficult year throughout the globe.The Sensex shed more than 50%, falling as low as 7,900 points. Indias capitalmarkets have clearly undergone a dramatic shift in the last 10 years.The trends in the global and Indian capital markets have a direct link to the activitylevels of capital market lawyers. Indian law firms, Amarchand & Mangaldas &Suresh A Shroff & Co (Amarchand), AZB & Partners (AZB), Luthra & Luthra(Luthra) aggressively expanded their capital markets practices to cater to theupsurge in capital markets. The Indian legal market also witnessed the birth ofspecialized capital markets firms. S&R Associates (S&R) was established in 2005after the majority of the team from Pathak & Associates (P&A) branched out to setup a capital markets focused firm. In 2007, Shobhan Thakore, considered by many,
  • 3. including Chambers, as the senior statesman of the Indian capital markets left AZBto set up Talwar Thakore & Associates.The Indian capital markets growth story was not restricted to the Indian law firmsalone as foreign law firms beefed up India practice groups by hiring Indian qualifiedlawyers as partners and associates and increasingly focused on India related capitalmarkets transactions. UK and US based firms shuffled their talent across the globeand started their India practices either from their home jurisdictions or fromSingapore and Hong Kong. In 2008-09, however, the capital markets teams acrosslaw firms struggled to keep themselves busy due to the effects of the sub-primecrisis. The banking crisis and Lehman’s bankruptcy added to global woes. India was 3not far behind in supplying its share of bad news. The chairman of SatyamComputers admitted to fraud, taking the company to the verge of bankruptcy beforethe Government intervened. During this phase, foreign law firms found the time tofurther analyze their strategies for India. Some foreign law firms remainedundeterred by the falling markets and continued to recruit Indian talent. Forinstance, Rahul Guptan, capital markets partner at Amarchand, joined CliffordChance and shifted base to Singapore to build the India capital markets practice.In the recession year of April 2008 - March 2009, only 21 companies were able toraise Rs. 2,271 crore ($510 million). However, fiscal year 2010 was a year wheremarkets put the worst behind them and posted a strong growth. As the confidencein the market grew so did the capital raising activities. 108 companies filed the draftred herring prospectus (DRHP) with the Securities Exchange Board of India (SEBI).SEBI’s Capital Market report of March 2010 states that of the 108 companies thatapproached SEBI, 38 companies have successfully raised capital with 34 companiesgoing public and 4 companies undertaking follow-on public offers (FPO) to raise
  • 4. approximately Rs. 37,125 crore ($ 8.25 billion). The Qualified Institutional Placement(QIP) market was also very active with 58 companies raising approximately Rs.41,133 crore ($ 9.14 billion). The first quarter of calendar year 2010 has alreadyresulted in 20 successful IPOs, with India witnessing the third largest number ofIPOs after US and China, based on the findings in a recent Ernst & Young report.With such an active market, lawyers were kept busy and the capital markets teamswere back in action. Companies were keen to raise capital in some form or anotherand bankers were keen to get the deal flow rolling. This desire for activity gave riseto the QIP as a preferred mode of raising capital. Vandana Shroff, Partner,Amarchand, says “India’s growth story is well documented. Being a capital deficientcountry, there will continue to be a need to raise large pools of capital which can befulfilled by approaching the capital markets in India and internationally, providedthat we do see some length of stability of the international capital markets”.Bar & Bench analyses the legal side of the Indian capital markets practice andprovides a set of rankings of the Indian and foreign law firms which have advisedthe companies and the underwriters in the capital raising process. The rankings arebased on various factors such as number and value of transactions. In this report, wealso bring to you the insights of leading individuals including partners at Indian andforeign law firms and in-house counsel who have experience of working in thecapital markets in India.MethodologyParameters considered for rankings:1) We have factored in all transactions where: (a) in case of an IPO, theCompany has filed the draft red herring prospectus, red herring prospectusor the prospectus with the SEBI; and (b) in case of a QIP, the Company has
  • 5. filed a Placement Document with the stock exchanges between April 1, 2009to March 31, 2010.2) We would like to highlight that there are several instances whereCompanies have filed their draft red herring prospectus with SEBI but havenot yet raised capital from the market. We have included such transactionsfor the purposes of determining the rankings.3) Please note this report is limited to only IPOs (including FPOs) and QIPsand does not cover other forms of capital raisings.4RankingsIndian Law FirmsAmarchand recorded the highest number of capital markettransactions and was ahead of all other law firms as it acted as thelegal advisor in 67 IPO / QIP transactions. Amarchand’s capitalmarkets practice is headed by Managing Partner of the Mumbaioffice, Cyril Shroff who is assisted by Partners, Yash Ashar inMumbai, Arjun Lall in Bangalore and Prashant Gupta in Delhi.Amarchand’s tally of 67 transactions was way ahead of Khaitan & Co’s (Khaitan) 22transactions and Luthra’s 20 transactions.It is no surprise that Amarchand has the largest capital markets team in Indiacomprising 57 lawyers exclusively focused on capital markets. Of these 57 lawyers,25 are based in Mumbai, 15 in Delhi, 12 in Bangalore and 5 in Hyderabad.Amarchand’s capital market transactions in number and valueencompassed a healthy mix of sectors with good representationsfrom banking and finance, Government, energy, real estate andinfrastructure. While Amarchand completed 3 large government
  • 6. public offerings (NTPC, NHPC and Oil India), it was alsoinvolved in high profile and large transactions of privatecompanies such as Jindal Power, SKS Microfinance, RelianceInfratel and JSW Energy, each of which has either raised orproposes to raise capital in excess of Rs. 2,700 crore ($500million).Table No. 1: Indian Law Firms - Top Firms*Rank Firm IPO QIPCompanyMandatesUnderwritersMandatesCompanyMandatesUnderwritersMandatesTotal1 Amarchand 28 8 25 6 672 Khaitan 9 4 7 2 223 Luthra 7 8 2 3 204 AZB 3 5 4 4 165 CrawfordBayley10 - 4 1 156 S & R 1 7 2 2 12
  • 7. 7 J. Sagar &Associates3 2 5 1 118 RajaniAssociates6-3-99 Kanga & Co 3 - 1 - 49 Trilegal 2 - 1 1 49 VaishAssociates4---4* These rankings are based on the total number of mandates inclusive of IPO and QIP transactions forthe fiscal year2009-10. **For a list of Indian law firms outside the Top Firms see Table No. 5 on Page 16aaInterview of CyrilShroff - Page 95Graphical Representation of Top FirmsAs the fund raising statistics show, 73% of the capital raising transactions wereconcluded by 7 law firms in terms of number of transactions. 22 law firms advisedonly a single capital market transaction while 7 law firms had double-digittransactions. For details see Table No. 1 and Table No. 5.Luthra and Khaitan have also raised the bar and have aggressivelyexpanded their teams as well as number of transactions over the lastfew years. After several years at Amarchand, MadhurimaMukherjee (pictured) joined Luthra to set up its capital markets
  • 8. practice. Luthra has also managed to capture some of the highprofile capital market transactions last year. Madhurima, Partnerand Head of Capital Market practice, who built this practice overthe last four years at Luthra, says “we have concentrated our energies on buildingthe team as quality legal advice, personalized attention and a professional approachwas the only thing that we had on offer”.Amarchand and Luthra have managed to bag key roles in almost all significantcapital market transactions. The Government of India, which was the most activeplayer in the capital markets, has managed to raise about Rs. 30,000 crore ($6.6billion) benefiting Amarchand and Luthra. Luthra bagged key roles alongsideAmarchand in the NTPC, Oil India and Rural Electrification public offers. Onaccount of its sheer size and experience, Amarchand has emerged as a clear leader interms of both in terms of number of transactions and value of the transactions (seeTable Nos. 1 and 5). Although the team at Luthra is less than half the size ofAmarchand’s team with 20 lawyers, it has also gained market share with a good mixof transactions. There are several reasons for Luthra’s growth this year. Seen as aDelhi firm till a few years back, Luthra has now emerged as a true national playerwith the strengthening of its Mumbai and Bangalore offices. Luthra beefed up itscapital markets practice with the hire of Manan Lahoty to head its Mumbai capitalmarkets practice to work closely with Madhurima in Delhi. “Whether out of Delhi orMumbai the entire team and our client advisory is seamless and consistent. Ourmantra is timely advice and partner level attention for every client” adds Manan.“If you pick any Luthra lawyer in the capital markets team today, you will find thatwe offer a degree of care and dedication and because of this team we have managedto achieve a reputation within 4 years with a recession in between” says
  • 9. Madhurima. The other reason for Luthra’s growth is “sheer partner level attentionfor every client. We see it as building a relationship and an investment in everyclient. Manan and I go through every single document and not just a few sections ofthe IPO document. This is very important”. 6Khaitan had a very aggressive 2009-10, bagging several IPO representations acrosssectors and segments. Ranked below Amarchand in terms of the number oftransactions, Khaitan has benefited by leveraging its multi-city presence under thestrong leadership of Rabindra Jhunjhunwala.AZB and S&R concluded fewer but equally high profile transactions as compared toAmarchand and Luthra. AZB also benefited from the number of real estatecompanies raising capital and were involved in 5 out of the 7 large real estatetransactions. AZB, like Amarchand, has built strong teams in both Mumbai andBangalore.S&R, a niche capital markets firm, has some high profile companies in its resumeincluding Sterlite Energy, SKS Microfinance and NMDC. Notably S&R has been theunderwriters ‘go to counsel’, as they represented the underwriters in 9 out of the 12transactions in which they were involved.Crawford Bayley has been predominantly involved in capital raisings by mid-capand small-cap companies, apart from the NMDC IPO, which was the largest IPO in2009-10. Crawford Bayley advised mid-cap companies like Talwalkers, which raisedabout Rs. 75 crore ($ 16 million) and had 10 such IPO transactions to its account.Rajani Associates (Rajani) has bulked up its capital marketspractice in the last few years. Rajani has advised on nearly 91 IPOsfrom early 2004 when it set up the capital markets practice. SanjayAsrani and Sangeeta Lakhi (pictured) are the two partners who
  • 10. have built the capital markets practice. Sangeeta Lakhi says“Indian companies are always looking at raising capital and thestory will be intact for a few decades at least. We focus on midcapcompanies, a good opportunity for a firm of our size. We have a dedicated capitalmarkets practice and have done varied transactions with most mid-cap companies”.Sangeeta’s team consists of 12 lawyers dedicated to capital markets transactions andshe says her team has done well even in the recession years.The fee structure seems to be a concern in the mid-cap segment, which Sangeeta isquick to admit. There are severe pricing pressures when it comes to mid-capcompanies trying to raise capital. We sometimes are forced to turn down somerepresentations, as they do not make economic sense. She said “the foreign law firmshave also faced similar pricing pressures. Some of the foreign law firms have told usthat it is very difficult to work with Indian companies as they negotiate hard andpay late!”However, the start up story of Delhi based Axon & Partners (Axon)offers hope for newcomers. Axon, started in 2009, already haslanded 2 QIP transactions with around 5 other related capitalmarket transactions in the pipeline. Axon has team has been quitebusy and has advised on complex and large IPOs such as the UnitedBank of India IPO. Co-Founder Abhimanyu Bhandari (pictured) said,“we are a start-up, but we have the skill and have good qualitylawyers from the country’s top law firms. We want to be small, niche and profitablefor our fee earners”. Abhimanyu further added “unlike the West, we have a handfulof law firms that have a monopoly over the market. The landscape of capital marketsis changing with most issues not warranting an international legal counsel (ILC) as
  • 11. most of them are cost sensitive. Also the fact that most issues need not raise moneyfrom the outside market, when issues are fully subscribed in India”. This statementpartly holds good. Of 108 IPOs, which have raised or are planning to raise capital,only 44 companies had ILCs, while most of them had only one domestic counsel.7Top 25 IPOs – 2009-10Bar & Bench also examined the quantum ofcapital raised or proposed to be raised as anindicator of the profile of the transaction.Since there were 166 IPO / QIP transactions,we decided to close in on the top 25 IPOs andleave out the QIPs, as the capital raisedthrough most of the QIPs were in the Rs. 450crore ($100 million) to Rs. 900 crore ($200million) range and very few QIPs outside thisrange. Companies and underwriters often useexperienced law firms based on the quantumof capital to be raised. In most cases it is appropriate to assume that the profile of thetransaction is directly proportional to the quantum of capital to be raised. Thisensures that companies and underwriters engage leading capital market experts andlaw firms to ensure that their transaction sails through the regulatory maze.Bar & Bench analyzed top 25 IPOs that either raised capital or filed their DRHP inanticipation of raising capital in the fiscal year 2009-10.Amarchand continued its dominance with 18 out of the top 25 IPOs, most of themthrough company mandates. Luthra managed 5 underwriter representations with atotal tally of 7 IPO transactions. IPOs by Real Estate companies most of which are
  • 12. yet to raise capital gave AZB the third spot. The underwriters helped S & R tosecure the fourth position. Khaitan, which had a mixed profile of transactions, wasin the fifth spot.Table No. 2 ranks the law firms based on the Top 25 IPOs. A detail list of top 25 IPOsis listed in Table No. 3.Table No. 2: Indian Law Firms: Rankings based on top 25 IPOs in terms oftransaction valueFirm IPOCompany Mandates Underwriters MandatesTotalAmarchand 15 3 18Luthra 2 5 7AZB 2 4 6S&R145Khaitan - 4 4Crawford Bayley 2 - 2J. Sagar Associates 1 1 2Axon - 1 1Dua Associates - 1 1Fox Mandal 1 - 1Wadia Ghandy 1 - 18Table No. 3: Top 25 IPOsCompany CompanyAdvisorsUnderwriters –
  • 13. Domestic AdvisorUnderwriters -International Advisor$ (Inmillion) *NMDC Limited CrawfordBayleyS & R Dorsey & Whitney 2,667Jindal Power Limited Amarchand Khaitan Latham & Watkins 1,600NHPC Limited Amarchand - Dorsey & Whitney 1,342NTPC Limited Amarchand Luthra O Melveny & Myers 1,193Sterlite Energy Limited Amarchand S & R Latham & Watkins 1,133Reliance Infra Tel Limited Amarchand Khaitan Linklaters 1,111Emaar MGF Land Limited S & R Dua Associates Linklaters 856Gujarat State PetroleumServices LimitedAmarchand J. Sagar Associates Jones Day 778Sahara Prime City Limited Amarchand Luthra Milbank TweedHadley McCloy667Lodha Developers Limited WadiaGhandyAmarchand Linklaters 667Oil India Limited Amarchand Luthra Ashurst 617JSW Energy Limited Amarchand Khaitan Latham & Watkins 600
  • 14. Jaypee Infratech Limited CrawfordBayleyLuthra Skadden, Arps, Slate,Meagher & Flom502Adani Power Limited Amarchand Khaitan Jones Day 489Indiabulls Power Limited Amarchand - Clifford Chance 391Rural ElectrificationCorporation LimitedLuthra Amarchand Ashurst 364BPTP Limited AZB Luthra Latham & Watkins 333DB Realty Limited Luthra AZB Jones Day 333Ambience Limited Amarchand AZB Dorsey & Whitney 288Avantha Power &Infrastructure LimitedAmarchand Axon Partners Dorsey & Whitney 278Oberoi Realty Limited Amarchand AZB Shearman & Sterling 267SJVN Limited Fox Mandal AZB K&L Gates 267Prestige Estates ProjectsLimitedAZB Amarchand Clifford Chance 267SKS Microfinance Limited Amarchand S & R Wilson SonsiniGoodrich & Rosati250Pipavav Shipyard Limited J. Sagar
  • 15. AssociatesS & R Dorsey & Whitney 178*Capital raised or proposed to be raised has been sourced from publicly available information andcompany reports9ConversationBar & Bench spoke to Cyril Shroff, Managing Partner of the Mumbai office andNational Capital Market head of Amarchand on his views about the changing trendsand reasons for the firms dominance.“The quiet period in 2008 gave us an opportunity to introspect,focus on our strengths, innovate on new opportunities fordevelopment by going back to the drawing board”.Capital Market TrendsThe capital market practice in India has changed dramatically inthe 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 thevarious regulators to the financial downturn have contributed to confidence in theIndian capital markets. SEBI has taken a proactive role in streamlining disclosurerequirements to international standards. Even its review process is focused onsubstantive review of key aspects such as accounting MD&A (Management,Discussion & Analysis), rather than merely ensuring form compliance. All thesefactors have all contributed to larger public offerings, a greater number of capitalmarket transactions and buoyant capital markets in India. The next 5 years promisemore of the same – i.e., an ever-active securities regulator focusing on key aspectssuch as materiality levels in disclosures, promoting new capital raising instrumentssuch as Indian depository receipts and also potentially a better and deeper debtmarket.
  • 16. On the company front, we see certain sectors leading the charge for capital raisingsuch as infrastructure, retail, education, information technology, renewable sourcesof energy and life sciences, and at a macro level professionally and independentlymanaged companies backed by private equity players.Capital markets were relatively quiet in 2008. What action did Amarchand take tocounter the recession on the business development and associate managementfronts?The quiet period in 2008 gave us an opportunity to introspect, focus on ourstrengths, innovate on new opportunities for development by going back to thedrawing board. We took various steps including being the first to look at alternateissuances 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 inadvising various Indian companies in relation to buyback and restructuring offoreign currency convertible bonds such as those of Suzlon and Subex. During thisperiod we also advised on a few capital rising offerings such as the rights offeringsby Hindalco, the IPO of Mahindra Resorts. We also effectively utilized the time tobroad-base the skill sets of our capital markets team in areas complimentary to theircore practice. We trained our lawyers on financial statements and basics ofaccounting, we cross staffed across teams (such as real estate, M&A, private equityetc.). These steps helped us to be first off the blocks when markets changed fromMay 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
  • 17. capital markets. In order to capitalize on the benefits of having a robust capitalmarket practice such as market awareness, publicity and relationship building, smalland 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 lotmore publicity now than what they did a few years ago, and therefore there is a 10trickle-down effect on the various individual transactions and their advisors. This isalso an indication of the buoyancy of the Indian capital markets, as a whole. Thelarge firms will continue to advise on the complex, path breaking and first of a kindtransactions, leveraging on their depth and experience.Challenging transactions..NHPC and Oil India which were both Government transactions, required severalyears to prepare these companies and work on documents which would have fairdisclosure on these companies. They were extremely challenging and complex. Wealso advised on India’s first issuance of NCD plus warrants issuance through theQIP route by HDFC. We were also instrumental in assisting companies such asSuzlon and Subex to restructure their foreign currency convertible bonds, whichwere the firsts of its kind.Managing Talent and work?Whilst we believe our experience and depth of our team is sufficient to cope with thedemands of a recovering market, exciting and experienced talent who can add valueto our existing strength would always be welcome. In a nutshell, our focus ispredominately 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 internationallaw firms. The financial turmoil of the last year has seen a number of Indianlawyers return to the fold. Your comments on this trend across the Indian legal
  • 18. market in general.We have also experienced a trend of lawyers trained by us or otherwise seeking tomove 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 thelegal industry as a whole. Anecdotally, the number of Indian lawyers seeking tomove back from US and UK is far greater in portion from those in jurisdictions suchas Singapore and Hong Kong and we believe this trend will continue in short term.After all there is no place like home.International Legal CounselsLike many other businesses and services,international law firms also see India as theopportunity that cannot be missed. On thecapital markets front, unlike the dominationof a few domestic firms, the transactions arequite widely spread across internationalfirms, with Jones Day, Dorsey, Linklaters,Latham & Watkins and Clifford Chance beingthe dominant players in 2009-10. In terms ofthe number of transactions in 2009-2010, JonesDay heads the list of international law firmswith 18 deals, closely followed by Dorsey,which was mandated, on 17 deals. Linklatersand Latham have focused on the premiumend of the market and acted as legal advisorson 12 and 7 deals, respectively. The other notable event is the rise of Clifford Chance
  • 19. as an important player in the Indian capital markets.On the strategic front, the international firms have adopted aggressive fee strategiesin last few years and have also hired Indian qualified lawyers with experience in theIndian market. 11Table No. 4 depicts active International Legal Counsels (ILC) in terms of theirrepresentations in both IPO and QIP mandates.Table No. 4: Top ILCRank Firm IPO QIP Total1 Jones Day 7 11 182 Dorsey & Whitney 10 7 173 Clifford Chance 5 7 123 Linklaters 3 9 124 Latham & Watkins 4 3 75 Allen & Overy 2 4 66 DLA Piper, Singapore - 4 46 Skadden, Arps, Slate, Meagher &Flom2247 Ashurst 2 - 27 White & Case 2 - 28 Freshfields Bruckhaus Deringer 1 - 18 K&L Gates 1 - 18 Milbank Tweed Hadley McCloy 1 - 18 O Melveny & Myers 1 - 18 Pepper Hamilton 1 - 1
  • 20. 8 Shearman & Sterling 1 - 18 Wilson Sonsini Goodrich & Rosati 1 - 1ConversationsBar & Bench spoke to Manoj Bhargava, Partner, Jones Day, which has been the mostactive ILC and Rajiv Gupta, Partner, Latham & Watkins, recepients of the IFLR IndiaCapital Markets Team of the Year award on their views about the changing trends inthe Indian capital market landscape.Manoj Bhargava, Partner, Jones Day (Singapore)“I frankly think it is terrific to see Indian lawyers coming backto India. This is great for the Indian market and Indian lawfirms. I believe that this phenomenon will continue now withthe growth of Indian economy”What are the capital market trends over the last five years andand where do you think the market is headed over the next fiveyears?The last five years have seen many new foreign law firms undertake internationaltransactions for Indian companies. There are reasons for this. Earlier, capital marketsin India, particularly, for Indian companies raising equity capital in excess of Rs.2,250 crore ($ 500 million) was very limited. Now there are several companies, whichare raising significant amounts of capital. So, the Indian capital market has maturedin terms of depth. In addition, if you compare the sheer number of capital marketstransactions that have completed in the past three years in India with any othercountry, barring perhaps US and China, you’d be surprised with the high levels ofactivity in India.Another trend in the last two years, there have been stricter levels of risk
  • 21. management, compliance and disclosure. Investment banks are more focused andcommitted to Indian clients. Investors, especially after the 2008 downturn, are morediscerning and active. And regulator activism and oversight has increased as well. 12What is the importance of India for Jones Day? What strategies separate Jones Dayfrom the rest?Jones Day continues to maintain its leadership position in the international capitalmarkets practice in India. We believe in delivering quality work, which means thatour transactions involve significant commitment and time for partners who havetremendous experience and expertise. We see India as a long-term story andinvesting right talent and expertise in building our India practice. Our commitmentand expertise is evidenced by recent best deals of the year awards to the TechMahindra-Satyam acquisition and the Adani Power IPO.Which capital markets transaction has been the most challenging last year andwhy?One of the most challenging transactions last year was the IPO of Adani Power,which raised in excess of Rs. 2,700 crore ($ 600 million). The reasons are several.Firstly, there had not been any IPO of this size in India for the past 18 months or so.Secondly, the then new ICDR regulations brought forth new nuances such as theability to have anchor investors. Moreover, 11 Banks were underwriting the issue.This issue gave the confidence to the markets that the capital markets are back inaction after a year and half of difficult time.Do you hold the view that the geographical location of the transaction team affectsa capital markets transaction?Singapore is becoming a more accepted jurisdiction to do the international aspects ofIndia related transactions. This is because of the short time difference and ease of
  • 22. travel to a number of cities in India as compared from London or New York, forexample.The financial turmoil of the last year has seen a number of Indian lawyers return tothe fold. Your comments on this trend across the Indian legal market in general.I frankly think it is terrific to see Indian lawyers coming back to India. This is greatfor the Indian market and Indian law firms. I believe that this phenomenon willcontinue now with the growth of Indian economy.What is your outlook for the Financial Year 2010-11 for Jones Day?We continue to submit proposals for capital market transactions for private as wellas state-owned companies. The last few months of 2010 have been very busy andthe balance of the year looks good. We have also seen significant activity in otherpractice areas such as project finance, acquisition finance and cross-border M&A inrecent months.Rajiv Gupta, Partner, Latham & Watkins (Singapore)“Latham is one of the premier international firms active in India,and it is one of the firms that has experience advising issuers andunderwriters across the entire breadth of capital markets. Whetherit is advising on IPOs, QIPs, convertible bond offerings, ADRs orGDRs”Capital Market TrendsThere have been several noticeable trends over the past five years. First, the size ofofferings by Indian issuers has been growing and there are more and more large sizeglobal offerings reflecting the maturing and increasing depth of the Indian capitalmarkets. Second, India has become a destination and region in its own right for 13raising capital - previously companies could not raise more than a few hundred
  • 23. million, but now we have capital issues like Reliance Power, in excess of Rs. 13,200crore ($ 3 billion). While the ADR/GDR markets remain attractive, fewer companiesare using that route as Indian markets have become strong and have the appetite forlarge transactions. Third, Indian capital markets now attract companies acrosssectors, rather than in any single sector. For example, Power, Steel, Pharma,Education, Real Estate etc.One must also credit SEBI, which has, through gradual reforms, made India anattractive financial platform. There are now various systematic capital raisingopportunities like QIPs etc. that have benefited the Indian companies. Convergenceto IFRS should align the Indian accounting rules with those in international marketsand make it even easier for Indian companies to make global offerings.India ConnectionLatham is one of the premier international firms active in India, and it is one of thefirms that has experience advising issuers and underwriters across the entirebreadth of capital markets. Whether it is advising on IPOs, QIPs, convertible bondofferings, ADRs or GDRs. Our practice has been at the forefront of market for manyyears, having advised Infosys on the first US listing by an Indian company morethan 10 years ago.Further, Latham & Watkins is recognized for its ability to close highly complex andhigh profile transactions. We are not in a race to do the maximum number oftransactions.Challenging transactions last yearThe Sterlite Convertible Bond offering, a multi-award winning transaction, has beenone of the most challenging transactions last year. This $500 million (Rs. 2,250 crore)offering, was the first time an Indian company issued SEC registered convertible
  • 24. bonds in the United States. Latham also represented Sterlite in connection with a$1.6 billion (Rs. 7,200 Crore) American depositary share (ADS) offering, this was thelargest equity offering by an Indian company in the US since 2007.Outside of capital markets, the firm advised on the acquisition of Satyam ComputerServices Limited by Tech Mahindra Limited. In the role of sellers counsel, thistransaction was a perfect example of Latham’s global platform, with ten officesacross 3 continents working collectively on the transaction.Is Singapore the new hub?Singapore has become a preferred destination for India practice for international lawfirms. This preference for Singapore is derived from a number of factors includingSingapore’s geographical proximity to India, the frequency and volume of availableair travel between the two countries, and a time difference of only 2.5 hours betweenIndia and Singapore which makes it easy for lawyers to be available for clientsalmost on a real time basis. These factors, coupled with the large pool of talentavailable in Singapore, makes Singapore the logical destination.International Indian LawyersHistorically, the reasons why people migrated from India to other countries werecareer growth, money and infrastructural support. This was certainly the case ten tofifteen years ago, but the situation has changed drastically since liberalization.Material comforts are now readily available in India and most lawyers feel that theIndian economy will be a growth story for at least the next few decades.Given this migration and the subsequent return to the region of many of theselawyers, there is now a desire among companies to deal with domestic lawyers withinternational experience. 14Many of the points mentioned above have had the net result that there is now
  • 25. tremendous competition amongst foreign law firms and domestic law firms forquality Indian lawyers. It is now commonplace to see lawyers either moving fromNew York to Singapore or Hong Kong, or directly to Mumbai, Delhi and Bangalore.One other trend of note is that most Indian and multinational companies arerecruiting associates and partners of foreign law firms for their in-house counselpositions in India. As international companies set up regional or country offices inIndia, they need the assistance of in-house counsels.As a result of all these changes, Indian lawyers based outside the domestic markethave a number of options when considering returning to their roots.Client’s perspectiveBar & Bench spoke to Neeta Sanghavi, Country Counsel, UBS to get a Clientsperspective on the role of law firms in capital raising initiatives, challenges faced byin-house counsels and various criterion that form the basis of appointment of lawfirms.“I have thoroughly enjoyed the ups and downs of working oncapital markets transactions; the tensions associated when acompany going public, the challenge in interpreting certain laws,regulations, the chaos that entails in the last few days before thedeal is launched and ……sometimes going without sleep atall….... The adrenalin rush and the excitement, keeps megoing………”Issues a company’s General Counsel faces with the changing trends in the Indiancapital marketsWith investors ready to invest in the Indian markets from all around the globe,capital raise initiatives have become a lot more complex and cautious. Investors are
  • 26. seeking various disclosure mandates and there is a growing awareness to identifyand mitigate risk at the earliest. Although law firms assist the General Counsel, thelaw firms identify the risks. The General Counsel thereafter has to assess the riskslaid out by the law firms, identify mitigation steps and take a decision based on therisk reward analysis. Therefore, to that extent, the buck stops at the GeneralCounsel’s table.How are law firms chosen for IPO / QIP transactionsQuality of the Team and not the ‘star partner’ – We look at the team involved in thetransaction and not just the ‘star partner’ who makes for the pitch. Most of the times,the team that is executing the transaction is different from the team that had come topitch for a transaction. Also with the hectic activity in the Indian capital markets, wedefinitely see the bandwidth of the capital markets group in a law firm and thendecide.Knowledge, experience, value additions and not only statistics – While marketshare and experience of law firms in similar kind of transaction helps, I would alsofactor in the “time and attention” promised by partners. The most important factoris quality of service and timeliness on a consistent basis.Fees – The fee is one of the big differentiators in the capital market transactions.Although there is some gap between fees charged by the domestic law firms andILCs , cost effective transactions and value addition are important to companies andpromoters.Quality of Closing opinion – Some leading Indian law firms have started this trendto scale down their closing opinions. Investment Banks have to provide a duediligence certificate to the regulator whereas certain domestic law firms shy away 15from delivering a holistic opinion. This leaves investment banks exposed to a large
  • 27. degree as there is no back-to-back comfort, unlike in developed countries whereback-to-back comfort is the norm. The purpose of a holistic closing opinion is twofold: (i) it serves as a risk mitigation tool; and (ii) it serves as a solid due diligencedefense, in the event of any allegations of a lack of due diligence.Foreign Law Firms vs. Indian Law FirmsThe legal profession in India has undergone a significant change in the recent pastand is emerging as highly competitive and ready to move along with the wave ofglobalization in recent times. Therefore, it is not surprising that foreign law firms arekeen on increasing their operations in India through best friends/ tie – ups withdomestic law firms and offer a full range of legal services. Indian lawyers areextremely intelligent and technically sound but sometimes need to hone theirspecialized skills, sector knowledge and adopt a more business like approach.Indian law firms are working towards this and have changed themselvessignificantly over the last few years. International law firms these days have teammembers who have Indian experience and hence can bring to the table the India –expert.As a General Counsel….I have had the benefit, joy and privilege (as well as faced intense pressure) onworking on some of the most complicated, complex and landmark capital markettransactions. I also enjoy discussing complicated issues with some of the bestlawyers in the world and I am working with lawyers from different jurisdictions. Ona current deal, I am trying to understand the property laws of Serbia, as the client isdeveloping a large real estate project in Serbia. This global exposure is a fantasticexperience, often complex and nerve-racking.Sometimes issuers/promoters come with their ‘legacy’ law firms who may be
  • 28. excellent corporate lawyers but may not have relevant experience on capital markettransactions. It then becomes challenging to get the deal done.General Counsels have become a strong source of support in business decisions andtheir role has over a period of time increased to become a strategic and managementrole.It is enormously complex to sift through the complex web of several laws andregulations in India and overseas, while assisting a company to take it to the public.Adherence to law is enormously complex. It’s enormously complicated to assessyour risks, what kinds of risk abatement processes you’re going to have and all thepoints where the law intersects with those processes.16Table No. 5: Indian Law Firms – Top Firms*IPO QIPRank FirmCompanyMandatesUnderwritersMandatesCompanyMandatesUnderwritersMandates Total1 Amarchand 28 8 25 6 672 Khaitan 9 4 7 2 223 Luthra 7 8 2 3 204 AZB 3 5 4 4 16
  • 29. 5 Crawford Bayley 10 - 4 1 156 S & R 1 7 2 2 127 J. Sagar & Associates 3 2 5 1 118 Rajani Associates 6 - 3 - 99 Kanga & Co 3 - 1 - 49 Trilegal 2 - 1 1 49 Vaish Associates 4 - - - 410 Corporate Law Chambers 3 - - - 310 Desai & Diwanji - 1 1 1 310 JurisPrudent Consulting 3 - - - 310 Nishith Desai Associates 1 - 1 1 311 ALMT Legal 2 - - - 211 Axon - 2 - - 211 S.N. Gupta & Co 2 - - - 211 Wadia Ghandy 1 - - 1 212 A.R. Ramanathan 1 - - - 112 Alliance Corporate 1 - - - 112 Bharucha & Partners - - 1 - 112Chir Amrit LawChambers 1 - - - 112 Dave & Girish & Co 1 - - - 112 Dipayan Choudhary 1 - - - 112 Dua Associates - 1 - - 112 Fox Mandal & Co 1 - - 1
  • 30. 12 Hariani & Co - 1 - - 112 Hemant Sethi & Co 1 - - - 112 HSB Partners Advocates 1 - - - 112 Joby Mathew 1 - - - 112 Link Legal - 1 - - 112 New Delhi Law Offices 1 - - - 112 P. Pal & Associates 1 - - - 112 Rajeev Goel & Associates 1 - - - 112 Sunil Shukla 1 - - - 112 Talwar Thakore - - 1 - 112 Thakker Associates 1 - - - 112 Udwadia & Udeshi 1 - - - 112 V.S. Raju & Associates 1 - - - 112 Vigil Juris 1 - - - 112 Zenith India Lawyers 1 - - - 1* These rankings are based on the total number of mandates inclusive of IPO and QIP transactions forthe fiscal year2009-10]17Copyright © www.barandbench.combarandbench.com is the new face of legal journalism in India. In less than a year, it has already become amarket leader of news, views and opinions for legal professionals. We publish crisp, accurate and timelynews on legal developments in India and around the globe. We offer our readers, latest News,Interviewswith industry leaders, Columns by legal experts, and interesting Features.For a detailed table of the IPO / QIP transactions with a list of legal advisors for each transaction in thefiscal year of 2009-10 please write to us at gauri.manga[at]barandbench[dot]com.

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