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CAM undercuts SAM, Luthra by 5-12x to win complex Air India sale mandate for only Rs 29.9 L [UPDATE: Technical scores]

Air India snaps up bargain on legal fees to sell itselfAir India snaps up bargain on legal fees to sell itself

Cyril Amarchand Mangaldas (CAM) has significantly underbid competitors Shardul Amarchand Mangaldas (SAM) and Luthra & Luthra to win the final rounds of blind bidding for the mammoth strategic Air India disinvestment, quoting Rs 29.9 lakh ($46,100) in fees for what is expected to be a complex series of corporate M&A deals, said sources with knowledge of the bid.

It is understood that the next highest bids in the final round were in the crores - around Rs 3.5 crores ($539,400) in Luthra’s case, and around Rs 1.5 crores ($231,000) in Shardul Amarchand’s case, according to authoritative sources.

That would mean Cyril Amarchand had bid fees that were respectively 12 and 5 times lower than Luthra and SAM to win the mandate.

One lawyer we spoke to privately doubted that CAM’s quoted fees would even cover lawyers’ salaries on what is expected to be a complex deal, probably requiring partner resources and several fee-earners working full-time for up to 10 months.

We have reached out to Cyril Amarchand for comment earlier today.

The three law firms had qualified for the final round of the disinvestment of the debt-ridden national carrier after the first stage of tenders that assesses on technical skills, which had also seen Crawford Bayley, ALMT Legal, Trilegal and Hammurabi & Solomon throw their hat in the ring, as we had re-reported from a PTI report yesterday.

Air India has debts of over Rs 50,000 crores, with the government looking to sell off the flag carrier and five or more subsidiaries, such as ground luggage handling and others, to private companies.

Consultancy firm EY and investment bank Rothschild also won the bidding process, quoting 0.2 per cent of the total transaction fees, according to the Business Standard.

In 2010 we had reported in Bloomberg on the new tendering process for disinvestments, which introduced the initial technical tendering stage (assessing firms pitches on technical skill, experience and capacity to deliver the work), followed by a stage where shortlisted firms were selected on the basis of the lowest fees (the so-called L1 principle).

In 2010, Luthra & Luthra and DLA Piper had jointly won the bids to handle the capital markets disinvestments of Engineers India for Rs 136 lakh and in Coal India for even less than that - both far below what law firms would charge most private companies.

The reason the government has been able to get such heavy discounts on legal services is manyfold: some may feel that the prestige and experience of these marquee mandates could offset the money lost (or not earned), or that the client and government relationships that can be groomed in such mandates will be worth it in the longer run.

The government's job in managing such low-paid legal work will be to ensure that the law firms continue fielding sufficient resources and partner time in the mandates, even if it may not be financially lucrative for them.

Update 1 November 2017, 15:23: Bar & Bench has reported the technical scores given by the government for a number of law firms in the bid, out of 100 (the cut-off to proceed to the final bidding round being 80):

Crawford Bayley & Co 78

Cyril Amarchand Mangaldas 89

Hammurabi & Solomon Partners 63

Luthra & Luthra 94

Shardul Amarchand Mangaldas 91

Trilegal 79

This news was first reported via WhatsApp to Legally India subscribers on Saturday. To hear about exclusive market information first, please sign up below.

Photo by lasta29

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Like +9 Object -18 Lexpert 30 Oct 17, 10:33  controversial
CAM has enough of a war chest to subsidise this and more! I think this harks back to the days of the Re 1/- privatisation bids.. 30 lac will cover the admin costs at least. It's a win-win for CAM as they get a marquee deal (which in Delhi they are struggling to get) and the associates stay busy..
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Like +18 Object -4 AMSS Alum 30 Oct 17, 12:48  interesting  top rated
Admin costs? Won't even cover 1/5th of CAM's OOPs on a transaction of this size. The bid is to ensure that CAM stays atop the Mergermarket lists for another year or two. Wonder if the other partners will have their targets raised to fund this one.
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Like +1 Object -0 Lexpert 30 Oct 17, 15:01
That was a typo; I meant 30 lac won't even cover the admin costs!!!
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Like +1 Object -17 cammie 30 Oct 17, 20:06
No one wants a Pyrrhic victory! obviously the commercials worked out better for Cyril, and others only had short-term billing benefits in mind. Sad to see motivated comments against cam getting the deal.. nothing is worse for associates and more so, partners, than sitting idle without work. This mandate will infuse a new lease of life in CAM delhi

good luck to all working on this. billing isn't everything.
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Like +14 Object -6 What a use! 30 Oct 17, 13:45  interesting  controversial
A war chest to keep Delhi team busy :) What a use I say!
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Like +29 Object -0 Bullshit 30 Oct 17, 18:05  interesting  top rated
Key line "Associates stay busy". Yes, Saket mall will have less footfall on working days.
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Like +24 Object -0 They can have it 30 Oct 17, 11:14  interesting  top rated
It's not even worth the due d cost. If you throw peanuts you will get monkeys. Surprised that the govt actually wants to do this transaction after seeing the rates.

Btw who will do this transaction for them.. bombay and Bangalore office ? The flight ticket to Delhi will be more than 30l by end of it. Winter has come.
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Like +5 Object -2 Lexpert 30 Oct 17, 15:02
I believe that Mr Pillai from Delhi office will be driving this initiative.. @Kian - pls check and confirm. Thanks!
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Like +9 Object -0 Guest 31 Oct 17, 00:03  interesting
Free flights on Air India
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Like +15 Object -0 Guest 30 Oct 17, 11:17  interesting  top rated
Shady max.
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Like +4 Object -0 Worth it!! 04 Nov 17, 13:00
Tell me one partner in Cam Delhi who is worth it or can justify his / her salary. It will ultimately be a deal executed by the Mumbai / Bangalore office on the face of it done by the Delhi office.. Situation is beyond funny!!!!
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Like +2 Object -1 Yo 30 Oct 17, 11:27
This article says Cyril Amarchand Mangaldas quoted 1.2 per cent of the total deal as their advisory fee. I am confused?
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Like +4 Object -1 kianganz 30 Oct 17, 11:58
Interesting, thanks for sharing. I don't think that article is accurate - am very confident in the figure we reported. Also, lawyers usually don't quote a percentage of deal value on these kinds of deals? And for a law firm to get 1 percentage point more than even the banks on the deal, seems unheard of...

If someone has any information or thoughts on this report, please do share.
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Like +8 Object -5 CAMiKazi 30 Oct 17, 11:32  controversial
Say whatever to KCO, its has changed the pricing models for-ever. From what I have seen CAM rarely undercuts this low, then for deal like this I think its worth it !
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Like +5 Object -1 Erm 31 Oct 17, 10:22
CAM has done in the past as well!

Only way to get work?
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Like +9 Object -8 Q3 30 Oct 17, 11:46  controversial
frankly, its peanuts!
its not even 30lacs. 29.90.
But it would be a good experience for the Associates.
It also shows how desperate CAM were to bag the deal & were willing to reduce their usual steep fees, its a win-win situation for Air India.
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Like +11 Object -6 Desperate Times 30 Oct 17, 13:09  interesting  controversial
This only goes to prove that CAM has no work at present and is desperate to find work at any cost.
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Like +1 Object -1 Catch 30 Oct 17, 15:05
It's likely that the bid of 29.9 lakhs is exclusive of costs and expenses. This itself could be several times more than the bid amount.
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Like +12 Object -1 Name and Alias 30 Oct 17, 17:56  interesting
The bid conditions required quoting inclusive of OPEs
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Like +18 Object -3 CAMmie 30 Oct 17, 23:02  interesting  top rated
AZB has bid less than Re 1 for various government IPO mandates - it's just undercutting to get some high-profile public sector work. Everyone undercuts to get some public sector work for (largely reputational) gains, it has nothing to do with CAM Delhi doing well or not.

CAM Delhi is doing remarkably well with steady growth on a y-o-y basis and we'll only do better in the future.
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Like +8 Object -1 Wookie 31 Oct 17, 12:53  interesting
In Percy we trust.
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Like +4 Object -4 Cutting Chai 31 Oct 17, 16:11
The CAM plane is reaching greater hieghts and soon it will be soaring far above the rest. All engines firing full thrust.
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Like +1 Object -0 Fake News! 02 Nov 17, 02:09
Incorrect. The bids you quote were for OFSs through SE mechanism. Quotes for IPOs of PSUs / GoI companies are comparable with quotes given by other national law firms. I would know!
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Like +15 Object -2 Well well 31 Oct 17, 10:24  interesting  top rated
This proves why firms smaller in size (i.e., no bulk hiring) do well financially and generate excellent work products as compared to firms which function like factories.
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Like +23 Object -0 Guest 31 Oct 17, 11:12  interesting  top rated
Maybe they intended to bid 2.99 crores?
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Like +1 Object -0 -- 31 Oct 17, 20:46
It makes perfect sense:

1. Deal size will propel CAM in every deal talley, and also help with ratings at Chambers etc.
2. It keeps associates busy - who otherwise may not be gainfully employed.
3. No work and still have to pay associates v. lot of work at low fee, but with added benefits: No brainer for CAM!
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Like +0 Object -0 AMSS Alum 01 Nov 17, 14:03
@Kian, might want to update the article in light of this -
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Like +0 Object -0 kianganz 01 Nov 17, 15:25
Many thanks, have updated the story...
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Like +4 Object -2 Explains a lot 02 Nov 17, 11:04
This explains a lot about Air India’s current state – they chose the least competent firm (to qualify in terms of technical scores) only because they quoted low. Absolutely dumb! You need quality, and at times that comes at a cost. Like someone said, pay peanuts and you get monkeys. Anyway, best to all on the deal.
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Like +1 Object -0 Who cares 04 Nov 17, 13:57
It's so boring to see people taking such interest in cam still. Its lawyers know that they have nowhere else to go. Who will hire scrap and junk? Might as well sit about and kill time. Yawn
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Like +3 Object -0 Mx. X 04 Nov 17, 14:15
Is it one fifth or 5 times lower?
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Like +6 Object -1 Observer 04 Nov 17, 16:42  interesting
So technically, luthra is a firm superior in this area. That is nice. Congratulations firm.
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Like +0 Object -0 Balle Balle 06 Nov 17, 14:07

- On behalf of L&L
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Like +3 Object -0 JRD 06 Nov 17, 11:32
Luthra has scored the highest on technical parameters. And they have quoted a figure which justifies their technical expertise and has not undercut. Seems like Luthra is not interested to undercut the market. They must be having enough work and dont want to play on heavily discounted rates just to keep their associates busy.
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Like +1 Object -0 Balle Balle 06 Nov 17, 14:09
That's true. Thanks.
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Like +3 Object -0 Guest 06 Nov 17, 17:28
That is true. Luthra & Luthra has a very strong disinvestment practice. And also very strong aviation sector practice and M&A practices. Who fixed this mandate then with 12x undercut?
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Like +2 Object -0 Pee 06 Nov 17, 17:35
CAM Delhi will finally get to do some work after two years. what will happen to Saket Shopping malls now. The malls will lose a chunk of their spending customers.
It will be a huge due diligence exercise and one of the largest disinvestment in the country, I guess that even lawyers from Mumbai and Bangalore will be called for the same. By quoting Rs. 29.90 lakhs, CAM has lost its respect and is behaving like Tier III firm. Kaam ke liye kuchbhi. They still need to build their CV? Aren't they like the biggest and oldest (successor) firm in the country?
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Like +0 Object -0 Danker 08 Nov 17, 00:53
At an age exceeding 50, Cyril Shroff, with a firm that's one of India's best known, is quoting a fresher's price. Feel sorry for the guy. Let me know if you need a night out at Ambiance near express towers, Ciri.
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