IFLR 1000
The Guide to the World's Leading Financial Law Firms

Many legal practitioners and industry professionals have agreed that the last 12 months have been tumultuous for the Indian market. The harsh conditions of the capital markets in India, the depreciation of the rupee and the Indian government's various tax amendments proposed in the Union Budget 2012/13, including the controversial retrospective amendment of the Income Tax Act (1962) has hindered economic activity in the country in the past 12 months according to some....

Many legal practitioners and industry professionals have agreed that the last 12 months have been tumultuous for the Indian market. The harsh conditions of the capital markets in India, the depreciation of the rupee and the Indian government's various tax amendments proposed in the Union Budget 2012/13, including the controversial retrospective amendment of the Income Tax Act (1962) has hindered economic activity in the country in the past 12 months according to some.

However, the harsh market conditions have not stopped lawyers from stepping out and going it alone with their own practices. "There are law firms setting up every year in India, there are many partners who have been splitting off from the larger firms to set up their own businesses, bringing their clients with them," says one partner. The challenge comes when they need to get new business." Another peer agrees, "It's almost impossible to keep track of who's active in the market. There have been many new firms popping up every year."

Despite this, the number of new firms making an impact in the financial and corporate space is much lower. One example is Alliance Legal, which was set up in September 2011 by Priyanka Roy (previously with JSA), Ravi Kumar (TTA), and Vishnu Jerome (AZB) but has already been recognised by peers as a rising firm in both the financial and corporate spaces.

Another trend in the last few years has seen some of the market's more established names restructuring and modernising. to cope with changing market situations. Both Amarchand Mangaldas, the largest law firm in India and Khaitan & Co have altered structures in recent years.

International firms are currently prohibited to practice in India, whether in litigation or non-litigation. Currently, international firms mostly do business in India by forming "best friend" relationships with local Indian firms, using local firms as local counsel, yet handling large amount of advisory work for clients' operations in India. Some of the major firms which have a dedicated Indian operation include Allen & Overy, best friend of Trilegal, and Linklaters, best friend of Talwore Thakore & Associates.

Many lawyers, however, have noted that there is an obvious trend towards liberalisation of the Indian legal market. A High Court decision was passed earlier in February 2012 allowing foreign lawyers and law firms to do business in India on a "fly-in-and-fly-out" basis, while refusing their plea to be allowed to practice in India. Lawyers from international firms are officially allowed to fly in-and-out of India while advising clients on transactions, but they are forbidden to set up their own offices in.

Although lawyers generally agree that the new clarification does not have significant implication on the way international firms do business in the country, some practitioners from international firms have noted that the court decision reflects the general attitude of Indian authority towards the liberalisation of the Indian legal market. A partner from an international law firm says, "The decision clarifies the rights of foreign lawyers and also gives confidence to the attitude of the court towards international firms which operate in India."

CONTEXT AND TRENDS
In the banking space, many partners noted that external commercial borrowings (ECB) were on the rise. In the Union Budget 2012/13, the Indian government has announced it is to raise the ECB limits for various sectors in India....

CONTEXT AND TRENDS

In the banking space, many partners noted that external commercial borrowings (ECB) were on the rise. In the Union Budget 2012/13, the Indian government has announced it is to raise the ECB limits for various sectors in India. The selected sectors include power, aviation, roads and low-cost housing. The liberalisation on external borrowings is expected to relieve the financially stressed sectors, as the interest rates of domestic banks have been constantly raised and the cap limit for domestic loans has already been reached early this year for a lot of sectors.

The refinancing and redemption of Foreign Currency Convertible Bonds (FCCB) has been another major focus for the legal market this year. The FCCB is a convertible instrument popular amongst Indian companies between 2005-2008, during which the stock market was performing well. As its name suggested, FCCBs are tie-up loans, but have equity as convertibles. These bonds normally involve lower borrowing costs and are issued in very low coupon rates, sometimes even zero coupon rates. This year, close to 100 companies will need to repay an estimated amount of $8.9 billion in FCCBs by the end of fiscal year 2015. However, due to the poor performing stock market, many lenders are unwilling to convert their debt into equity.

Many firms have been handling FCCB work, mainly involving overseas funds. Companies are looking towards low-cost Chinese funds as the European and American lenders decline. "Renminbi financing has become a hot option for refinancing FCCBs these days. A lot of law firm partners are travelling to talk with Chinese banks in order to seek possible financing options for their clients." The infrastructure and power sectors, in particular, are interested in obtaining these Chinese loans as they may get better terms if they agree to other import-related relationships with China's manufacturing companies.

Law firms have also been advising on compliance and regulatory matters with regard to the recently introduced Qualified Foreign Investors (QFI) license. The investment route allows foreign individual investors, pension funds and trusts to invest directly in Indian equities, without registering as a foreign institutional investor. A general counsel of an international investment bank says, "Unlike FDI (foreign direct investment), the QFI route provides a more direct route for investing in the Indian market with less regulatory compliance requirements. It is also a lot easier to exit via QFI than via FDI. This should be highly attractive for investors who wish to invest in India on a short term basis."

MAJOR LATERAL HIRES

Raghubir Menon
From: White & Case
To: Amarchand & Mangaldas & Suresh A Shroff & Co

Dorothy Thomas
From: Kochhar & Company
To: Amarchand & Mangaldas & Suresh A Shroff & Co

Sumes Dewan
From: Fox Mandal
To: Desai & Diwanji

Prashanth Sabeshan
From: In-house
To: Majmudar & Partners

...

CONTEXT AND TRENDS
The M&A and private equity markets experienced a pair of major legislation changes this year which have affected the market. The first was an adjustment to the income tax law following a dispute between Vodafone International Holdings and the Indian Tax Authority over the latter's jurisdiction over the former's 2007 offshore acquistion of Hong Kong-based Hutchison Holdings....

CONTEXT AND TRENDS

The M&A and private equity markets experienced a pair of major legislation changes this year which have affected the market.

The first was an adjustment to the income tax law following a dispute between Vodafone International Holdings and the Indian Tax Authority over the latter's jurisdiction over the former's 2007 offshore acquistion of Hong Kong-based Hutchison Holdings. It is commonly understood that India does not have the jurisdiction to tax the related parties for an offshore transaction. The Tax Authority, however, sought to obtain $2.2 billion in capital gains tax from Vodafone as a transfer of Indian assets were involved in the transaction. In January 2012, the Supreme Court pronounced in favour of Vodafone, however, following the judgment in the Union Budget 2012-13, the finance minister proposed to amend the 1961 Income Tax Act to tax offshore transactions involving any Indian assets. The amendment will be implemented with retrospective effect from April 1 1962. Under this, all persons, whether resident or non-resident, will be required to deduct tax at source and pay it to the government if they have business connections in India, even if the transaction is executed offshore. The amendment has raised concerns amongst M&A and private equity investors and has become a strong deterrent to overseas investors.

Lawyers have differing opinions about the effect of the amendment. Whereas many practitioners regard the retrospective amendments to be disastrous for the market, some have expressed that the effect of the amendments have been exaggerated. "Despite the sentiments arising from the tax amendments the private equity space has still been quite active this year. It is true that this year has not been as good as the previous few years, but still many of the private equity investors in India are strategic investors and some of them are willing to take the legal risks in spite of the promising economic growth in India."

Another relevant legislative change saw the SEBI ratifying the new Takeover Code on September 23 2011. The initial threshold limit for triggering an open offer has been increased from 15% to 25% and the new regulation allows foreign strategic investors and minority foreign partners to increase their shareholding up to 25% without triggering the costly takeover regulations.This, in the words of one corporate lawyers, "may now provide many private equity investors with a breathing space for making significant investments in public listed companies." In addition, the level of activity in listed companies by strategic and private equity investors is now increased to up to 24.9%, a much more significant material stake compared to the previous 15%.

MAJOR LATERAL HIRES

Sharad Abhyankar
From: ANS Law Associates
To: Khaitan & Co

Anindita Phukan
From: Phukan & Associates
To: Khaitan & Co

Ganesh Prasad
From: Amarchand & Mangaldas & Suresh A Shroff & Co
To: Khaitan & Co

Abhilekh Verma
From: J Sagar Associates
To: Khaitan & Co