India Business Law Journal – December 2010/January 2011

Consolidating change

2010 will be remembered for its dizzying highs and terrifying lows

But more importantly, it marks the culmination of a decade in which poverty has come to be seen as a “removable condition”. This is thanks to what the economist Jagdish Bhagwati calls a “revolution of perceived possibilities”, which has prompted India’s underprivileged to aspire for more and demand that politicians deliver more. As a result, he suggests the smart politician should look to augment reforms, not reverse them.

Can this revolution of the mind propel India to greater heights? Or will that happen only when the mindset of those who call the shots – both within government and in India Inc – changes? For there is no doubt that while the “noughties” were all about India pushing itself forward onto the world stage, the next few years will focus on consolidation. And whether India does this successfully will depend on how well the system works: is it accountable and transparent and does it function in a socially responsible manner?

This issue’s Vantage point (India in 2011) offers incisive predictions for the year ahead. Nine business and legal experts turn their thoughts to the opportunities and challenges that India-focused companies will face in the next 12 months.

While Nishith Desai, the managing partner of Nishith Desai Associates believes there is “a risk that corruption could consume an unnecessary amount of resources” others like Sidharth Bhasin, a partner at Shearman & Sterling, focus on India’s growth. He predicts that 2011 “will see an increased number of international financings coming out of India”. A sentiment echoed by Jagannadham Thunuguntla, strategist and head of research at SMC Global Securities, who forecasts markets will perform in line with economic growth, but cautions investors not to expect “supernormal returns”. These wide-ranging insights into what to expect in the immediate future will be invaluable for everybody who wants to know where this newly confident economy is heading.

But plotting effective strategies for the future also requires insights from the past. In our Cover story (Deals of the Year), for the fourth consecutive year India Business Law Journal analyses and celebrates the exceptional transactions, court cases and intellectual property dramas that have played out over the past 12 months. We showcase 40 of the most significant India-focused deals in capital markets, M&A, banking and finance, private equity, infrastructure and real estate along with 10 of the most significant legal disputes and IP enforcement actions. In doing so we pay tribute to the innovation and practical expertise of the lawyers and law firms that guided each matter to a successful resolution.

Typical of the winning deals is the leveraged buyout (LBO) of one of North America’s largest IT services providers, DecisionOne, by Glodyne Technoserve, a Mumbai-based company only half its size. “This was the first major LBO of an American company by an Indian company which used a significant amount of Indian debt,” said Abrar Hussain, corporate partner at Kirkland & Ellis, who led a team that advised Glodyne.

One of the winning capital markets deals is also the subject of this issue’s What’s the deal (Firing up the markets). Coal India’s remarkable US$3.4 billion IPO saw the modernization of a large state-owned company to ensure it met the exacting standards of sophisticated investors.

Our coverage of this IPO looks beyond the impressive numbers that it racked up, to highlight the many challenges that typically have to be overcome in similar deals. Describing the complexity of the work, Stephen Peepels, a partner at DLA Piper, which advised Coal India, said “a bank in China can do an offering that’s much larger in terms of the proceeds, but that doesn’t mean the due diligence obligation would be larger, or even as large as it was for Coal India”. Clearly there are many valuable lessons to be learned from this deal.

In the first of this issue’s Spotlight features, Atul Sharma of Link Legal presents his case for a super-regulator to oversee private participation in India’s infrastructure sector (A new direction for PPPs?). Sharma points out that while public-private partnerships (PPPs) play an increasingly important role in the development of the infrastructure sector, the current PPP framework has serious shortcomings that need to be tackled to ensure the orderly growth of the sector.

Our second Spotlight (Half-baked plans) throws light on the proposed goods and services tax (GST) that is set to radically transform India’s tax regime within the next 12 to 18 months. Shivam Mehta and Kapil Kumar Sharma of Lakshmikumaran & Sridharan highlight many elements of the new tax that need to be examined before any effective legislation can be put in place.

Another area where change is creeping in, but at a somewhat slower pace, is in pro bono work. This issue’s Intelligence report (Time to share) finds that while the average Indian lawyer is busy working towards billable targets, some are finding the time to give back to society. And while the beneficiaries are extremely grateful for the services they receive, there is a pressing realization that more can be done. As Ben Ramsden of Pants to Poverty, an NGO that receives pro bono help from Hogan Lovells, points out, there is “immense potential for the corporate might of India to link up on a pro bono basis with the marginalized poor”.

Sound advice for the start of a new year.