Khaitan & Co has filed more IPO drafts than any other firm in 2017 just ahead of Cyril Amarchand Mangaldas, in a market where downward pricing pressures have made it tough across the board.

According to our analysis of nearly 60 draft red-herring prospectuses (DRHPs) uploaded to the Securities and Exchange Board of India (SEBI) website in the 2017 calendar year, Khaitan had roles for either the issuer or the banks on 18, followed by Cyril Amarchand Mangaldas (CAM) with 17 core IPO mandates.

Out of those two, CAM had a strong slant towards acting for company issuers (in 14 out of 17 of their instructions), whereas Khaitan’s work was split nearly half between work for issuers (10) and for the banks and managers (8).

Unsurprisingly, both of these firms are also the ones with the biggest teams: Khaitan & Co has 7 equity capital markets partners, with a total lawyer headcount of 31 in equity capital markets. Cyril Amarchand on the other hand, has 8 partners, but a total lawyer headcount of 54.

Correction: Khaitan’s brochure lists 12 partners in its capital markets practice, however we have been told that this figure also includes secondary capital, debt capital markets and securities litigation. Update: CAM has clarified that its total supplied headcount figure includes only equity capital markets (ECM) lawyers.

Luthra & Luthra, meanwhile, has a slightly leaner team at only 5 partners (and around 25 total lawyers), but has punched far above its weight into third place with 14 IPOs, with an exact even split in its work between issuers and banks.

Shardul Amarchand Mangaldas too has an equally lean team of 5 partners (and around 25 total lawyers), but has pulled in 10 IPO mandates (6 of which were for issuers).

AZB & Partners and S&R Associates are neck-and-neck in the tally at 8 and 7 IPOs respectively (but while AZB had a slight preference for bank mandates (at 5 out of 8), S&R was unusual compared to the others in having acted only for banks and lead managers in all 7 of its IPOs).

AZB has a team of 4 partners (and a total team of around 24 lawyers) in Delhi and Mumbai, and S&R too has 4 core capital markets partners (though associates do not specialise only in a single practice area).

We have reached out to capital markets partners at all these firms for comment.

Trilegal and Kanga & Co had more modest capital markets presences, with three mandates each, while Crawford Bayley tied with J Sagar Associates (JSA) with two mandates.

How times have changed

Mumbai-based old-school solicitors firm Crawford Bayley used to have a massive capital markets practice, at least in volumes and associate headcounts, headed by a single equity partner Sanjay Asher.

In our last published capital markets league of the 2010-11 financial year, Crawford Bayley had a whopping 14 IPO mandates (ranking it fourth behind Amarchand Mangaldas, Luthra & Luthra and AZB & Partners). With two mandates in 2017, this now seems to have fallen off a cliff.

Khaitan was in distant fifth position back then, with only 11 IPOs (compared to combined Amarchand’s 39).

The reversal of fortunes between Khaitan and Amarchand can be attributed to Khaitan’s massive investment in the area (as evidenced by its massive partner headcounts), which began with the 2013 hire of former Morgan Stanley managing director and non-lawyer Sudhir Bassi, to head its practice as director.

Luthra, meanwhile, has managed to hold on to its position post the Amarchand split and the ascent of Khaitan, and is now in third place under the stewardship of Manan Lahoty in Mumbai, following the departure of ex-Luthra-capital markets head Madhurima Mukherjee to AZB in 2014.

Topsies and turvies

Amidst all the movings and shakings, the market has not been an easy one, with a number of firms having reported heavy pricing pressure from other firms, making it hard to maintain margins.

The biggest ones to blame in all this are the public sector undertakings (PSU).

“Basically all private deals are profitable - degrees vary,” comments one partner bluntly, then adds: “And none of government and PSU deals are.”

Still, while PSU deals may not pay a lot, they do work in keeping large teams busy and can build expertise and credibility in the market. It will be no surprise that the top-two-ranked firms in the tables handled the majority of PSU IPOs.

Khaitan worked on Cochin Shipyard, Hindustan Aeronautics, SBI Life Insurance and GIC.

Cyril Amarchand was involved in all of Khaitan’s PSU mandates, and also handled the one of Indian Renewable Energy Development Agency (alongside J Sagar Associates (JSA)).

Luthra scored the Housing and Urban Development Corporation (HUDCO) mandate (alongside Trilegal), as well as work in The New India Assurance Company IPO (in which AZB was also involved).

SAM has not done any PSU IPOs in 2017 (in stark contrast to the days when SAM and CAM were still one firm, and the majority of non-PSU mandates at Amarchand Mangaldas were based in CAM’s Mumbai home, while Delhi often scored the PSU mandates in the capital).

“We remain focussed on maintaining good profitability in a challenging practice area, pricing wise,” comments SAM Delhi-based capital markets practice head Prashant Gupta, which did not act on any IPOs. “We maintain amongst the smaller sized teams in the market and stayed away from PSU mandates, but I think transaction activity and pipeline in general is quite good.”

AZB’s Mukherjee echoes that sentiment. “We only want to do deals at a sensible price, or our costs don’t work out,” she explains. “Unfortunately, pricing continues to be the pain factor in capital markets.

“Law firms continue to undercut, even on deals where clients are raising billions and the pricing just doesn’t justify the hours spent on the deal. This lack of perspective may make this difficult practice unviable in the long run.”

Shareholder mandates

In recent years it has become a trend for law firms to also get mentioned in prospectuses for selling shareholder mandates, though some firms such as Shardul Amarchand Mangaldas and S&R Associates do not include their name for that work even when they handle it.

For the purpose of the total mandates metrics and ranking, we have therefore excluded selling shareholder mandates, which are usually a fraction of the work (and fees) of an IPO mandate for an issuer or the banks (four firms that only did one seller shareholder mandate each, are listed at the bottom of the table).

These mandates could be for private equity funds or promoters, which law firms in any case will want to keep sweet, and fees can range from as little as several thousand Rupees to more than Rs 20,000.

It’s not necessarily cookie cutter work though: it could require partner-led negotiations on agreements with underwriters, rather than just a simple proofread.

If those mandates were included, then CAM would be top of the roost by far, with eight mentions as acting for seller shareholders (compared to Khaitan’s 2 recorded such mandates).

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