Capital Markets

2009-2010
ipo-qip report

© www.barandbench.com
  

Market View and Law Firms

Capital markets in India have been a reflection of the country’s economic growth
and development over the last two decades. Bombay Stock Exchange’s sensitivity
index, the Sensex, has become the barometer of the Indian market. Several reports
have been published by leading international agencies on the potential scope of the
Indian capital markets, usually referencing the expectation that the Sensex will cross
the 20,000-point threshold by November this year. All these reports have one thing
in common – the Sensex is headed upwards and sky is the limit.

On the basis of the developments over the last decade, a FICCI – Mckinsey report
states that the Indian capital market could reach triple its current size by 2020. A
Business Today report predicts that the Sensex will touch the 1,00,000 point mark by
2025. This would mean an unimaginable rally of over 10 times from the level seen
just a few months ago, when the Sensex was toiling below the 10,000-point mark
after a meltdown that began in November 2008.

The growth in Indian capital

markets started in 1991 and has
been driven by a number of
regulatory reforms, liberalization,
capital control norms and the
continuous monitoring by the
regulatory agencies. Market
capitalization of companies has
increased more than six-fold and
  trading value has more than tripled.
By 2007, India had catapulted to the
sixth position in the global list of countries in terms of funds raised through Initial
Public Offering (IPO). A USAID report on capital markets in 2007 stated that India
was able to achieve this position because of a developed regulatory environment,
modern market infrastructure, steadily increasing market capitalization and
liquidity, the better allocation and mobilization of resources, a rapidly developing
derivatives market, a robust mutual fund industry, and increased issuer
transparency. Between 2003 and 2008, nearly 285 companies raised capital, of which
nearly 85 companies raised capital in 2007-08 alone. 2007 was by far the best year for
capital markets with the Sensex breaching the 20,000-point barrier and IPOs
accounting 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. India's capital
markets 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 activity
levels 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 the
upsurge in capital markets. The Indian legal market also witnessed the birth of
specialized capital markets firms. S&R Associates (S&R) was established in 2005
after the majority of the team from Pathak & Associates (P&A) branched out to set
up a capital markets focused firm. In 2007, Shobhan Thakore, considered by many,
including Chambers, as the senior statesman of the Indian capital markets left AZB
to set up Talwar Thakore & Associates.

The Indian capital markets growth story was not restricted to the Indian law firms
alone as foreign law firms beefed up India practice groups by hiring Indian qualified
lawyers as partners and associates and increasingly focused on India related capital
markets transactions. UK and US based firms shuffled their talent across the globe
and started their India practices either from their home jurisdictions or from
Singapore and Hong Kong. In 2008-09, however, the capital markets teams across
law firms struggled to keep themselves busy due to the effects of the sub-prime
crisis. The banking crisis and Lehman’s bankruptcy added to global woes. India was
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not far behind in supplying its share of bad news. The chairman of Satyam
Computers admitted to fraud, taking the company to the verge of bankruptcy before
the Government intervened. During this phase, foreign law firms found the time to
further analyze their strategies for India. Some foreign law firms remained
undeterred by the falling markets and continued to recruit Indian talent. For
instance, Rahul Guptan, capital markets partner at Amarchand, joined Clifford
Chance 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 to
raise Rs. 2,271 crore ($510 million). However, fiscal year 2010 was a year where
markets put the worst behind them and posted a strong growth. As the confidence
in the market grew so did the capital raising activities. 108 companies filed the draft
red herring prospectus (DRHP) with the Securities Exchange Board of India (SEBI).
SEBI’s Capital Market report of March 2010 states that of the 108 companies that
approached SEBI, 38 companies have successfully raised capital with 34 companies
going public and 4 companies undertaking follow-on public offers (FPO) to raise
approximately Rs. 37,125 crore ($ 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 already
resulted in 20 successful IPOs, with India witnessing the third largest number of
IPOs 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 teams
were back in action. Companies were keen to raise capital in some form or another
and bankers were keen to get the deal flow rolling. This desire for activity gave rise
to the QIP as a preferred mode of raising capital. Vandana Shroff, Partner,
Amarchand, says “India’s growth story is well documented. Being a capital deficient
country, there will continue to be a need to raise large pools of capital which can be
fulfilled by approaching the capital markets in India and internationally, provided
that we do see some length of stability of the international capital markets”.

Bar & Bench analyses the legal side of the Indian capital markets practice and
provides a set of rankings of the Indian and foreign law firms which have advised
the companies and the underwriters in the capital raising process. The rankings are
based on various factors such as number and value of transactions. In this report, we
also bring to you the insights of leading individuals including partners at Indian and
foreign law firms and in-house counsel who have experience of working in the
capital markets in India.

Methodology
Parameters considered for rankings:

1) We have factored in all transactions where: (a) in case of an IPO, the

Company has filed the draft red herring prospectus, red herring prospectus
or the prospectus with the SEBI; and (b) in case of a QIP, the Company has
filed a Placement Document with the stock exchanges between April 1, 2009
to March 31, 2010.

2) We would like to highlight that there are several instances where

Companies have filed their draft red herring prospectus with SEBI but have
not yet raised capital from the market. We have included such transactions
for the purposes of determining the rankings.

3) Please note this report is limited to only IPOs (including FPOs) and QIPs
and does not cover other forms of capital raisings.

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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 67 IPO / QIP transactions. Amarchand’s capital
markets practice is headed by Managing Partner of the Mumbai
  office, Cyril Shroff who is assisted by Partners, Yash Ashar in
Mumbai, Arjun Lall in Bangalore and Prashant Gupta in Delhi.
Amarchand’s tally of 67 transactions was way ahead of Khaitan & Co’s (Khaitan) 22
transactions and Luthra’s 20 transactions.

It is no surprise that Amarchand has the largest capital markets team in India
comprising 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 value

encompassed a healthy mix of sectors with good representations
from banking and finance, Government, energy, real estate and
infrastructure. While Amarchand completed 3 large government
public offerings (NTPC, NHPC and Oil India), it was also
involved in high profile and large transactions of private
companies such as Jindal Power, SKS Microfinance, Reliance
aa   Infratel and JSW Energy, each of which has either raised or
Interview of Cyril
Shroff - Page 9  
proposes to raise capital in excess of Rs. 2,700 crore ($500
million).

Table No. 1: Indian Law Firms - Top Firms*

Rank Firm IPO QIP Total

Company Underwriters Company Underwriters
Mandates Mandates Mandates Mandates

1 Amarchand
2 Khaitan
3 Luthra
4 AZB
5 Crawford
Bayley
6 S&R
7 J. Sagar &
Associates
8 Rajani
Associates
9 Kanga & Co
9 Trilegal
9 Vaish
Associates
28 8 25 6 67
9 4 7 2 22
7 8 2 3 20
3 5 4 4 16
10 - 4 1 15
1 7 2 2 12
3 2 5 1 11
6 - 3 - 9
3 - 1 - 4
2 - 1 1 4
4 - - - 4

* These rankings are based on the total number of mandates inclusive of IPO and QIP transactions for the fiscal year
2009-10. **For a list of Indian law firms outside the Top Firms see Table No. 5 on Page 16

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Graphical Representation of Top Firms

As the fund raising statistics show, 73% of the capital raising transactions were
concluded by 7 law firms in terms of number of transactions. 22 law firms advised
only a single capital market transaction while 7 law firms had double-digit
transactions. For details see Table No. 1 and Table No. 5.

Luthra and Khaitan have also raised the bar and have aggressively
expanded their teams as well as number of transactions over the last
few years. After several years at Amarchand, Madhurima
Mukherjee (pictured) joined Luthra to set up its capital markets
practice. Luthra has also managed to capture some of the high
  profile capital market transactions last year. Madhurima, Partner
and Head of Capital Market practice, who built this practice over
the last four years at Luthra, says “we have concentrated our energies on building
the team as quality legal advice, personalized attention and a professional approach
was the only thing that we had on offer”.

Amarchand and Luthra have managed to bag key roles in almost all significant
capital market transactions. The Government of India, which was the most active
player in the capital markets, has managed to raise about Rs. 30,000 crore ($6.6
billion) benefiting Amarchand and Luthra. Luthra bagged key roles alongside
Amarchand in the NTPC, Oil India and Rural Electrification public offers. On
account of its sheer size and experience, Amarchand has emerged as a clear leader in
terms of both in terms of number of transactions and value of the transactions (see
Table Nos. 1 and 5). Although the team at Luthra is less than half the size of
Amarchand’s team with 20 lawyers, it has also gained market share with a good mix
of transactions. There are several reasons for Luthra’s growth this year. Seen as a
Delhi firm till a few years back, Luthra has now emerged as a true national player
with the strengthening of its Mumbai and Bangalore offices. Luthra beefed up its
capital markets practice with the hire of Manan Lahoty to head its Mumbai capital
markets practice to work closely with Madhurima in Delhi. “Whether out of Delhi or
Mumbai the entire team and our client advisory is seamless and consistent. Our
mantra 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 that
we offer a degree of care and dedication and because of this team we have managed
to achieve a reputation within 4 years with a recession in between” says
Madhurima. The other reason for Luthra’s growth is “sheer partner level attention
for every client. We see it as building a relationship and an investment in every
client. Manan and I go through every single document and not just a few sections of
the IPO document. This is very important”.

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Khaitan had a very aggressive 2009-10, bagging several IPO representations across
sectors and segments. Ranked below Amarchand in terms of the number of
transactions, Khaitan has benefited by leveraging its multi-city presence under the
strong leadership of Rabindra Jhunjhunwala.

AZB and S&R concluded fewer but equally high profile transactions as compared to
Amarchand and Luthra. AZB also benefited from the number of real estate
companies raising capital and were involved in 5 out of the 7 large real estate
transactions. AZB, like Amarchand, has built strong teams in both Mumbai and
Bangalore.

S&R, a niche capital markets firm, has some high profile companies in its resume
including Sterlite Energy, SKS Microfinance and NMDC. Notably S&R has been the
underwriters ‘go to counsel’, as they represented the underwriters in 9 out of the 12
transactions in which they were involved.

Crawford Bayley has been predominantly involved in capital raisings by mid-cap

and small-cap companies, apart from the NMDC IPO, which was the largest IPO in
2009-10. Crawford Bayley advised mid-cap companies like Talwalkers, which raised
about Rs. 75 crore ($ 16 million) and had 10 such IPO transactions to its account.

Rajani Associates (Rajani) has bulked up its capital markets

practice in the last few years. Rajani has advised on nearly 91 IPOs
from early 2004 when it set up the capital markets practice. Sanjay
Asrani and Sangeeta Lakhi (pictured) are the two partners who
have built the capital markets practice. Sangeeta Lakhi says
“Indian companies are always looking at raising capital and the
  story will be intact for a few decades at least. We focus on midcap
companies, a good opportunity for a firm of our size. We have a dedicated capital
markets practice and have done varied transactions with most mid-cap companies”.
Sangeeta’s team consists of 12 lawyers dedicated to capital markets transactions and
she 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 is
quick to admit. There are severe pricing pressures when it comes to mid-cap
companies trying to raise capital. We sometimes are forced to turn down some
representations, as they do not make economic sense. She said “the foreign law firms
have also faced similar pricing pressures. Some of the foreign law firms have told us
that it is very difficult to work with Indian companies as they negotiate hard and
pay late!”

However, the start up story of Delhi based Axon & Partners (Axon)
offers hope for newcomers. Axon, started in 2009, already has
landed 2 QIP transactions with around 5 other related capital
market transactions in the pipeline. Axon has team has been quite
busy and has advised on complex and large IPOs such as the United
Bank of India IPO. Co-Founder Abhimanyu Bhandari (pictured) said,
  “we are a start-up, but we have the skill and have good quality
lawyers from the country’s top law firms. We want to be small, niche and profitable
for our fee earners”. Abhimanyu further added “unlike the West, we have a handful
of law firms that have a monopoly over the market. The landscape of capital markets
is changing with most issues not warranting an international legal counsel (ILC) as
most of them are cost sensitive. Also the fact that most issues need not raise money
from the outside market, when issues are fully subscribed in India”. This statement
partly 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.

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Top 25 IPOs – 2009-10

Bar & Bench also examined the quantum of
capital raised or proposed to be raised as an
indicator of the profile of the transaction.
Since there were 166 IPO / QIP transactions,
we decided to close in on the top 25 IPOs and
leave out the QIPs, as the capital raised
through most of the QIPs were in the Rs. 450
crore ($100 million) to Rs. 900 crore ($200
million) range and very few QIPs outside this
  range. Companies and underwriters often use
experienced law firms based on the quantum
of capital to be raised. In most cases it is appropriate to assume that the profile of the
transaction is directly proportional to the quantum of capital to be raised. This
ensures that companies and underwriters engage leading capital market experts and
law 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 in
anticipation of raising capital in the fiscal year 2009-10.

Amarchand continued its dominance with 18 out of the top 25 IPOs, most of them
through company mandates. Luthra managed 5 underwriter representations with a
total tally of 7 IPO transactions. IPOs by Real Estate companies most of which are
yet to raise capital gave AZB the third spot. The underwriters helped S & R to
secure the fourth position. Khaitan, which had a mixed profile of transactions, was
in the fifth spot.

Table No. 2 ranks the law firms based on the Top 25 IPOs. A detail list of top 25 IPOs
is listed in Table No. 3.

Table No. 2: Indian Law Firms: Rankings based on top 25 IPOs in terms of
transaction value

Firm IPO Total

Company Mandates Underwriters Mandates

Amarchand 15 3 18
Luthra 2 5 7

AZB 2 4 6

S&R 1 4 5

Khaitan - 4 4

Crawford Bayley 2 - 2

J. Sagar Associates 1 1 2

Axon - 1 1

Dua Associates - 1 1
Fox Mandal 1 - 1

Wadia Ghandy 1 - 1

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Table No. 3: Top 25 IPOs

Company Company Underwriters – Underwriters - $ (In

Advisors Domestic Advisor International Advisor million) *
NMDC Limited Crawford S&R Dorsey & Whitney 2,667
Bayley
Jindal Power Limited Amarchand Khaitan Latham & Watkins 1,600

NHPC Limited Amarchand - Dorsey & Whitney 1,342

NTPC Limited Amarchand Luthra O' Melveny & Myers 1,193

Sterlite Energy Limited Amarchand S&R Latham & Watkins 1,133

Reliance Infra Tel Limited Amarchand Khaitan Linklaters 1,111

Emaar MGF Land Limited S&R Dua Associates Linklaters 856

Gujarat State Petroleum Amarchand J. Sagar Associates Jones Day 778

Services Limited
Sahara Prime City Limited Amarchand Luthra Milbank Tweed 667
Hadley McCloy

Lodha Developers Limited Wadia Amarchand Linklaters 667

Ghandy
Oil India Limited Amarchand Luthra Ashurst 617
JSW Energy Limited Amarchand Khaitan Latham & Watkins 600

Jaypee Infratech Limited Crawford Luthra Skadden, Arps, Slate, 502

Bayley Meagher & Flom
Adani Power Limited Amarchand Khaitan Jones Day 489
Indiabulls Power Limited Amarchand - Clifford Chance 391

Rural Electrification Luthra Amarchand Ashurst 364

Corporation Limited
BPTP Limited AZB Luthra Latham & Watkins 333

DB Realty Limited Luthra AZB Jones Day 333

Ambience Limited Amarchand AZB Dorsey & Whitney 288

Avantha Power & Amarchand Axon Partners Dorsey & Whitney 278
Infrastructure Limited
Oberoi Realty Limited Amarchand AZB Shearman & Sterling 267

SJVN Limited Fox Mandal AZB K&L Gates 267

Prestige Estates Projects AZB Amarchand Clifford Chance 267

Limited
SKS Microfinance Limited Amarchand S&R Wilson Sonsini 250
Goodrich & Rosati

Pipavav Shipyard Limited J. Sagar S&R Dorsey & Whitney 178

Associates

*Capital raised or proposed to be raised has been sourced from publicly available information and company reports

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Conversation
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.

“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”.

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

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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.

Challenging transactions..

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.

International Legal Counsels

Like many other businesses and services,

international law firms also see India as the
opportunity that cannot be missed. On the
capital markets front, unlike the domination
of a few domestic firms, the transactions are
quite widely spread across international
firms, with Jones Day, Dorsey, Linklaters,
Latham & Watkins and Clifford Chance being
the dominant players in 2009-10. In terms of
the number of transactions in 2009-2010, Jones
Day heads the list of international law firms
with 18 deals, closely followed by Dorsey,
which was mandated, on 17 deals. Linklaters
  and Latham have focused on the premium
end of the market and acted as legal advisors
on 12 and 7 deals, respectively. The other notable event is the rise of Clifford Chance
as an important player in the Indian capital markets.

On the strategic front, the international firms have adopted aggressive fee strategies
in last few years and have also hired Indian qualified lawyers with experience in the
Indian market.

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Table No. 4 depicts active International Legal Counsels (ILC) in terms of their
representations in both IPO and QIP mandates.

Table No. 4: Top ILC

Rank Firm IPO QIP Total
1 Jones Day 7 11 18
2 Dorsey & Whitney 10 7 17
3 Clifford Chance 5 7 12
3 Linklaters 3 9 12
4 Latham & Watkins 4 3 7
5 Allen & Overy 2 4 6
6 DLA Piper, Singapore - 4 4
6 Skadden, Arps, Slate, Meagher & 2 2 4
Flom
7 Ashurst 2 - 2
7 White & Case 2 - 2
8 Freshfields Bruckhaus Deringer 1 - 1
8 K&L Gates 1 - 1
8 Milbank Tweed Hadley McCloy 1 - 1
8 O' Melveny & Myers 1 - 1
8 Pepper Hamilton 1 - 1
8 Shearman & Sterling 1 - 1
8 Wilson Sonsini Goodrich & Rosati 1 - 1

Conversations
Bar & Bench spoke to Manoj Bhargava, Partner, Jones Day, which has been the most
active ILC and Rajiv Gupta, Partner, Latham & Watkins, recepients of the IFLR India
Capital Markets Team of the Year award on their views about the changing trends in
the Indian capital market landscape.

Manoj Bhargava, Partner, Jones Day (Singapore)

“I frankly think it is terrific to see Indian lawyers coming back

to India. This is great for the Indian market and Indian law
firms. I believe that this phenomenon will continue now with
the growth of Indian economy”

What are the capital market trends over the last five years and
and where do you think the market is headed over the next five
  years?

The last five years have seen many new foreign law firms undertake international
transactions for Indian companies. There are reasons for this. Earlier, capital markets
in 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, which
are raising significant amounts of capital. So, the Indian capital market has matured
in terms of depth. In addition, if you compare the sheer number of capital markets
transactions that have completed in the past three years in India with any other
country, barring perhaps US and China, you’d be surprised with the high levels of
activity in India.

Another trend in the last two years, there have been stricter levels of risk
management, compliance and disclosure. Investment banks are more focused and
committed to Indian clients. Investors, especially after the 2008 downturn, are more
discerning and active. And regulator activism and oversight has increased as well.
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What is the importance of India for Jones Day? What strategies separate Jones Day
from the rest?

Jones Day continues to maintain its leadership position in the international capital
markets practice in India. We believe in delivering quality work, which means that
our transactions involve significant commitment and time for partners who have
tremendous experience and expertise. We see India as a long-term story and
investing right talent and expertise in building our India practice. Our commitment
and expertise is evidenced by recent best deals of the year awards to the Tech
Mahindra-Satyam acquisition and the Adani Power IPO.

Which capital markets transaction has been the most challenging last year and
why?

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 the
ability 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 in
action after a year and half of difficult time.

Do you hold the view that the geographical location of the transaction team affects
a capital markets transaction?

Singapore is becoming a more accepted jurisdiction to do the international aspects of

India related transactions. This is because of the short time difference and ease of
travel to a number of cities in India as compared from London or New York, for
example.

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.

I frankly think it is terrific to see Indian lawyers coming back to India. This is great
for the Indian market and Indian law firms. I believe that this phenomenon will
continue 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 well
as state-owned companies. The last few months of 2010 have been very busy and
the balance of the year looks good. We have also seen significant activity in other
practice areas such as project finance, acquisition finance and cross-border M&A in
recent 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 and
underwriters across the entire breadth of capital markets. Whether
it is advising on IPOs, QIPs, convertible bond offerings, ADRs or
GDRs”
 

Capital Market Trends

There have been several noticeable trends over the past five years. First, the size of
offerings by Indian issuers has been growing and there are more and more large size
global offerings reflecting the maturing and increasing depth of the Indian capital
markets. Second, India has become a destination and region in its own right for
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raising capital - previously companies could not raise more than a few hundred
million, but now we have capital issues like Reliance Power, in excess of Rs. 13,200
crore ($ 3 billion). While the ADR/GDR markets remain attractive, fewer companies
are using that route as Indian markets have become strong and have the appetite for
large transactions. Third, Indian capital markets now attract companies across
sectors, 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 an
attractive financial platform. There are now various systematic capital raising
opportunities like QIPs etc. that have benefited the Indian companies. Convergence
to IFRS should align the Indian accounting rules with those in international markets
and make it even easier for Indian companies to make global offerings.

India Connection

Latham is one of the premier international firms active in India, and it is one of the
firms that has experience advising issuers and underwriters across the entire
breadth of capital markets. Whether it is advising on IPOs, QIPs, convertible bond
offerings, ADRs or GDRs. Our practice has been at the forefront of market for many
years, having advised Infosys on the first US listing by an Indian company more
than 10 years ago.

Further, Latham & Watkins is recognized for its ability to close highly complex and
high profile transactions. We are not in a race to do the maximum number of
transactions.

Challenging transactions last year

The Sterlite Convertible Bond offering, a multi-award winning transaction, has been
one 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
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 the
largest equity offering by an Indian company in the US since 2007.

Outside of capital markets, the firm advised on the acquisition of Satyam Computer
Services Limited by Tech Mahindra Limited. In the role of sellers counsel, this
transaction was a perfect example of Latham’s global platform, with ten offices
across 3 continents working collectively on the transaction.

Is Singapore the new hub?

Singapore has become a preferred destination for India practice for international law
firms. This preference for Singapore is derived from a number of factors including
Singapore’s geographical proximity to India, the frequency and volume of available
air travel between the two countries, and a time difference of only 2.5 hours between
India and Singapore which makes it easy for lawyers to be available for clients
almost on a real time basis. These factors, coupled with the large pool of talent
available in Singapore, makes Singapore the logical destination.

International Indian Lawyers

Historically, the reasons why people migrated from India to other countries were
career growth, money and infrastructural support. This was certainly the case ten to
fifteen years ago, but the situation has changed drastically since liberalization.
Material comforts are now readily available in India and most lawyers feel that the
Indian 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 these
lawyers, there is now a desire among companies to deal with domestic lawyers with
international experience.

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Many of the points mentioned above have had the net result that there is now
tremendous competition amongst foreign law firms and domestic law firms for
quality Indian lawyers. It is now commonplace to see lawyers either moving from
New 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 are
recruiting associates and partners of foreign law firms for their in-house counsel
positions in India. As international companies set up regional or country offices in
India, they need the assistance of in-house counsels.

As a result of all these changes, Indian lawyers based outside the domestic market
have a number of options when considering returning to their roots.

Client’s perspective
Bar & Bench spoke to Neeta Sanghavi, Country Counsel, UBS to get a Clients
perspective on the role of law firms in capital raising initiatives, challenges faced by
in-house counsels and various criterion that form the basis of appointment of law
firms.

“I have thoroughly enjoyed the ups and downs of working on

capital markets transactions; the tensions associated when a
company going public, the challenge in interpreting certain laws,
regulations, the chaos that entails in the last few days before the
deal is launched and ……sometimes going without sleep at
all….... The adrenalin rush and the excitement, keeps me
going………”
 
Issues a company’s General Counsel faces with the changing trends in the Indian
capital markets

With 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
seeking various disclosure mandates and there is a growing awareness to identify
and mitigate risk at the earliest. Although law firms assist the General Counsel, the
law firms identify the risks. The General Counsel thereafter has to assess the risks
laid out by the law firms, identify mitigation steps and take a decision based on the
risk reward analysis. Therefore, to that extent, the buck stops at the General
Counsel’s table.

How are law firms chosen for IPO / QIP transactions

Quality of the Team and not the ‘star partner’ – We look at the team involved in the
transaction 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 to
pitch for a transaction. Also with the hectic activity in the Indian capital markets, we
definitely see the bandwidth of the capital markets group in a law firm and then
decide.

Knowledge, experience, value additions and not only statistics ­– While market
share and experience of law firms in similar kind of transaction helps, I would also
factor in the “time and attention” promised by partners. The most important factor
is 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 and
ILCs , cost effective transactions and value addition are important to companies and
promoters.

Quality of Closing opinion – Some leading Indian law firms have started this trend
to scale down their closing opinions. Investment Banks have to provide a due
diligence certificate to the regulator whereas certain domestic law firms shy away

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from delivering a holistic opinion. This leaves investment banks exposed to a large
degree as there is no back-to-back comfort, unlike in developed countries where
back-to-back comfort is the norm. The purpose of a holistic closing opinion is two
fold: (i) it serves as a risk mitigation tool; and (ii) it serves as a solid due diligence
defense, in the event of any allegations of a lack of due diligence.

Foreign Law Firms vs. Indian Law Firms

The legal profession in India has undergone a significant change in the recent past
and is emerging as highly competitive and ready to move along with the wave of
globalization in recent times. Therefore, it is not surprising that foreign law firms are
keen on increasing their operations in India through best friends/ tie – ups with
domestic law firms and offer a full range of legal services. Indian lawyers are
extremely intelligent and technically sound but sometimes need to hone their
specialized skills, sector knowledge and adopt a more business like approach.

Indian law firms are working towards this and have changed themselves
significantly over the last few years. International law firms these days have team
members 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) on
working on some of the most complicated, complex and landmark capital market
transactions. I also enjoy discussing complicated issues with some of the best
lawyers in the world and I am working with lawyers from different jurisdictions. On
a current deal, I am trying to understand the property laws of Serbia, as the client is
developing a large real estate project in Serbia. This global exposure is a fantastic
experience, often complex and nerve-racking.

Sometimes issuers/promoters come with their ‘legacy’ law firms who may be
excellent corporate lawyers but may not have relevant experience on capital market
transactions. It then becomes challenging to get the deal done.

General Counsels have become a strong source of support in business decisions and
their role has over a period of time increased to become a strategic and management
role.

It is enormously complex to sift through the complex web of several laws and
regulations 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 assess
your risks, what kinds of risk abatement processes you’re going to have and all the
points where the law intersects with those processes.

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Table No. 5: Indian Law Firms – Top Firms*

IPO QIP
Company Underwriters Company Underwriters
Rank Firm Mandates Mandates Mandates Mandates Total
1 Amarchand 28 8 25 6 67
2 Khaitan 9 4 7 2 22
3 Luthra 7 8 2 3 20
4 AZB 3 5 4 4 16
5 Crawford Bayley 10 - 4 1 15
6 S&R 1 7 2 2 12
7 J. Sagar & Associates 3 2 5 1 11
8 Rajani Associates 6 - 3 - 9
9 Kanga & Co 3 - 1 - 4
9 Trilegal 2 - 1 1 4
9 Vaish Associates 4 - - - 4
10 Corporate Law Chambers 3 - - - 3
10 Desai & Diwanji - 1 1 1 3
10 JurisPrudent Consulting 3 - - - 3
10 Nishith Desai Associates 1 - 1 1 3
11 ALMT Legal 2 - - - 2
11 Axon - 2 - - 2
11 S.N. Gupta & Co 2 - - - 2
11 Wadia Ghandy 1 - - 1 2
12 A.R. Ramanathan 1 - - - 1
12 Alliance Corporate 1 - - - 1
12 Bharucha & Partners - - 1 - 1
Chir Amrit Law
12 Chambers 1 - - - 1
12 Dave & Girish & Co 1 - - - 1
12 Dipayan Choudhary 1 - - - 1
12 Dua Associates - 1 - - 1
12 Fox Mandal & Co 1 - - 1
12 Hariani & Co - 1 - - 1
12 Hemant Sethi & Co 1 - - - 1
12 HSB Partners Advocates 1 - - - 1
12 Joby Mathew 1 - - - 1
12 Link Legal - 1 - - 1
12 New Delhi Law Offices 1 - - - 1
12 P. Pal & Associates 1 - - - 1
12 Rajeev Goel & Associates 1 - - - 1
12 Sunil Shukla 1 - - - 1
12 Talwar Thakore - - 1 - 1
12 Thakker Associates 1 - - - 1
12 Udwadia & Udeshi 1 - - - 1
12 V.S. Raju & Associates 1 - - - 1
12 Vigil Juris 1 - - - 1
12 Zenith India Lawyers 1 - - - 1

* These rankings are based on the total number of mandates inclusive of IPO and QIP transactions for the fiscal year
2009-10]

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barandbench.com is the new face of legal journalism in India. In less than a year, it has already become a
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For a detailed table of the IPO / QIP transactions with a list of legal advisors for each transaction in the
fiscal year of 2009-10 please write to us at gauri.manga[at]barandbench[dot]com.

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