India Business Law Journal presents its annual legal market report and directory of Indian law firms. Amid challenging times for India’s lawyers and law firms, Rebecca Abraham checks the pulse of the country’s legal profession
The dizzying rate at which new law firms are being set up across India would suggest that despite bleak prospects for the Indian economy, the country’s corporate lawyers are bullish about the future. Yet with lucrative transactions drying up and India Inc in trouble, some of India’s top law firms report that revenues have taken a beating and that the future looks anything but rosy.
Forecasting “a very serious doom and gloom scenario” for the legal market over the next two or three years, Berjis Desai, senior partner at J Sagar Associates, says growth in annual revenues at the 265-lawyer firm has fallen from 40% between 2003 and 2010 to about 18% since 2010-11.
Reporting that the firm posted revenue growth of “roughly 16% to 18%” over the past four months, Desai says: “I am pleasantly surprised that it has done as well as it has done in the circumstances. I thought it couldn’t and there would be stagnation.”
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Desai’s sentiments are echoed through much of India’s legal community: “The slowdown has indeed impacted on the work front and we anticipate revenues are surely going to get hit,” says Kavitha Vijay, a partner at Universal Legal.
After reporting a year ago that lawyers at Luthra & Luthra were “very busy”, the firm’s senior partner, Mohit Saraf, now readily admits that all is not well at the firm. “Our profitability [for the] last two-and-a-half years has taken a hit.”
Refocusing energies
As a result, Saraf says that the 270-lawyer firm, which has regularly acted on many of India’s headline making deals, is “moving out of the market that is very, very competitive” and will focus instead on becoming “a go-to firm for all complicated commercial transactions”.
Other full-service firms report that many practice areas have become commoditized, and that small lower-cost firms – which are often startups formed by breakaways from the bigger firms – are driving down fees.
“The legal profession has now largely become a lot of trade and commerce, with a focus on fees,” says Shardul Thacker, a partner at Mulla & Mulla & Craigie Blunt & Caroe in Mumbai. “You have to be careful that quality of service is maintained and not just ‘get the deal done’, because you are professionally accountable.”
Anand Prasad, a partner at Trilegal and one of its co-founders, says he sees no reason why his firm should provide services at a cheaper rate. “If cheap is more important to somebody than value, then I guess cheap is what they should take, for those who are looking for value, we will continue to do value work and we won’t drop to cheap.”
As such, Prasad says the 170-lawyer firm is looking to enter new practice areas that require greater intellectual input and where clients are willing to pay higher fees. These include crisis management, where clients require “newer kinds of lawyering, which is business lawyering in combination with a criminal law or a regulatory aspect”.
Amarchand Mangaldas similarly reports “a perceptible shift of momentum” towards specific practice areas such as data privacy, white collar crimes, corporate governance, insurance and taxation.
Developing niche areas
Law firms across India are alive to a changed reality, where larger companies increasingly hire outside counsel only when a particular matter cannot be handled by their in-house lawyers.
“This leads us to a natural conclusion that in order to cater to such focused needs, law firms need to have sector and subject specialists,” says Rabindra Jhunjhunwala, a partner at Khaitan & Co, another one of the heavyweights in the legal market.
That firms are investing heavily in such sector and subject specialists is evident from the large number of lateral hires that are currently being made. This is an expansion route that is also used by specialist firms that are working to broaden their practise areas.
BMR Legal, a three-year-old offshoot of BMR Advisors, a tax, M&A and risk advisory, is typical of the specialist firms that have used the lateral hire route to widen their offerings. While BMR Legal used to focus entirely on tax, it recently set up an M&A practice, which was greatly strengthened through the high-profile lateral hire of Amit Khansaheb, an M&A specialist who had been with Desai & Diwanji for 17 years.
“I think the tilt is more towards specialists because of the very complex nature of the regulation and the need for specialization,” says Mukesh Butani, the managing partner of BMR Legal, cautioning that he is not advocating specialization over generalist skills. Practice areas cornered by specialist firms include tax, intellectual property (IP), and insurance.
While high-profile patent and trandmark disputes have kept many of India’s top IP firms in the limelight, Celia Jenkins, a partner at Tuli & Co, an insurance boutique, says that the 27-lawyer firm’s regulatory and product development practice has seen robust growth as the Indian insurance industry has matured.
“The increasing use of Indian rather than overseas capacity for reinsurance support very often poses a conflict of interest for us … there is increasing work in representing insurance companies,” observes Jenkins.
Small can be beautiful
Even as the larger firms move towards new areas of practise, the smaller players in the market find they are increasingly relied upon.
“The small and leaner law firms are effectively competing in the Indian legal market alongside the big law firms,” says Sawant Singh, a partner at Phoenix Legal, a 41-lawyer firm that was set up in 2008. Singh adds that this is on account of an increasing tendency for clients, both domestic and foreign, to be “reputation-agnostic”, which makes them willing to mandate smaller and newer law firms to manage complex legal transactions.
Nusrat Hassan, the managing partner of DH Law in Mumbai, meanwhile, reports that his firm, which has 40 lawyers, has managed to minimize the impact of the slowdown by investing in new areas of growth.
Anuradha Iyer and Bakhtiar Sunavala, founding partners of I&S Associates, a small seven-year-old, Mumbai-based firm, say that several small and medium firms have been riding out the current economic meltdown, as they “recognized the need for, and took proactive steps to stem the initial setback”.
Souvik Ganguly, the founder and managing partner of Acuity Law, reports that the past 12 months “have been a period of growth and stability” for the two-year-old firm. While the firm has started an intellectual property practice, in the course of the year it has also put in place key IT systems and processes.
“The first year of our firm’s existence has been interesting and rewarding,” says Samuel Mani, a partner at Mani Chengappa & Mathur (MCM), a one-year old Bangalore-based firm founded by three ex-Infosys lawyers. “We knew that building the brand will take time and that has been borne out by our experience.”
“Clients are increasingly taking a leap-of-faith in instructing younger law firms,” says Jay Parikh, a partner at two-year-old law firm Verus. Parikh, a former senior associate at Bharucha & Partners, reports that the 20-lawyer firm has grown at “close to 400%” over the last six months of the current financial year as compared with first six-months of the year.
Vichar Partners, a 10-lawyer Chennai firm, reports that it has achieved a 95% growth in revenue each year since it was formed in September 2010.
Excellence matters
While such remarkable growth is typical of startup firms, achieving this over any significant period of time may not be easy.
“Clients nowadays look at both the firm and the expertise,” says Vineet Aneja, a partner at Clasis Law. “I think a lot of emphasis is on whether the requisite expertise is there, not getting into the fact of whether it’s a 10-lawyer firm or a 200-lawyer firm.”
“You cannot create a pool of generalists and expect a client to come to you – in a general law firm also you need to provide specialists,” cautions Butani at BMR Legal.
However, attracting experienced talent may have its challenges. Probal Bhaduri, a partner at MNK Law Offices, suggests that smaller firms are often unable to attract experienced talent as they do not invest sufficiently in “the knowledge base or integrity or ethics”, witnessed when some of the country’s pioneering corporate law firms set up shop soon after the opening of the Indian economy in 1991. MNK Law Offices is a 15-lawyer firm that was established in 1996.
“Problems begin when you spend more time marketing than reading things coming out of your office,” says Bhaduri. MNK Law Offices, which prides itself on being different, was recently able to attract two experienced lawyers: Srinivas Kilambi, a former general counsel of GE Commercial Finance, and Nivedita Tiwari, a former partner at Luthra & Luthra.
Searching for new pastures
While the principal offices of most law firms continue to be in Mumbai and Delhi, they are also looking to strengthen operations elsewhere.
Pointing out that Chennai is the location for 30% of the incorporations for foreign entities that they have assisted with, Gautam Khurana, the managing partner of India Law Offices, a 50-lawyer firm with headquarters in New Delhi, reports that his firm recently entered into a partnership with a Chennai firm. “As an outsider it is not easy to break into Chennai, but now that we have local partners it is going to look more local,” Khurana says.
Srinivas Kotni, meanwhile, reports that his Delhi-based firm, LexPort, set up an office in Bangalore earlier this year. Dubbed the Silicon Valley of India, Bangalore is an increasingly competitive legal market. Kotni’s firm, which has 16 lawyers, stands a good chance of finding a niche in the southern city, but many of the larger firms are struggling. Indeed, Venkatesh Mallabadi, the managing partner of Bangalore-based Vin Juris, reports that the larger law firms in the city are “majorly dependent” on real estate companies for work.
Law firms in other cities are also reporting increasing competition in the legal marketplace. “We are facing more competition and welcome that,” says Pranit Nanavati, a partner at Nanavati & Associates in Ahmedabad, who adds that his firm has clients who “have been with us for decades and trust us”.
Other firms are looking beyond India for growth opportunities. “Indian law firms are increasingly envisaging international collaborations as a way of expansion and to better service their international and national clients,” remarks Seema Jhingan, a partner at LexCounsel in New Delhi, who sees this is as a result of globalization.
Singh & Associates, a 70-lawyer firm with headquarters in New Delhi, currently has a senior associate based at the Beijing office of a Chinese law firm, Guangda Law Firm. It recently received a licence to open a representative office in Singapore, where several other firms, including Dua Associates, Kochhar & Co, Lexygen, Nishith Desai Associates, and Wadia Ghandy & Co, operate foreign law practices.
Manoj K Singh, the managing partner of Singh & Associates, says that his firm plans to open full-fledged offices outside India, notably in Hong Kong, London and New York.
However, some firms’ plans to open offices outside India may run into trouble as the rupee weakens and the economy stutters. Binu Radhakrishnan, the managing partner of Kris Law Chambers, a Bangalore-based IP firm that had a tie-up with a Singapore-based IP, media and entertainment law boutique, reports that his plans to open an independent firm in Singapore have been put on hold “partly due to the confusion caused by the FDI regime in India”.
With such challenges looming on the international horizon, some firms are happy to be firmly grounded in the domestic market. Prem Rajani, the managing partner of Rajani Associates, says that his firm has been sheltered from global economic problems by the fact that 80% of his clients are from India. “This has been a boon, since quite a few Indian clients are still active in India as well as outside India, as against foreign companies who are now looking at India rather cautiously.”
Foreign firms: as unwelcome as ever?
While Indian firms expand their global footprints, foreign law firms continue to be kept out of the country. However, it is possible that the coming year may see some limited movement on this front.
In February 2012, a two-judge bench of Madras High Court ruled that foreign law firms may “visit India for a temporary period on a fly-in and fly-out basis” to advise their clients on foreign law. It also ruled that “foreign lawyers cannot be debarred to come to India and conduct arbitration proceedings in respect of disputes arising out of a contract relating to international commercial arbitration”.
This decision was challenged by the Bar Council of India in the Supreme Court in April 2012 and has been pending ever since. As Sumeet Kachwaha, the managing partner of Kachwaha & Partners, points out, there is therefore “the likelihood” of a future decision by the Supreme Court that will have some bearing on the fate of foreign law firms in India.
Seeking out individuals
Many of the strongest brands in India’s legal market are individuals as opposed to law firms.
“My clients have not cared about the firm that I am associated with, as the relationship was initiated by me and continues to be serviced by me,” says Bhumesh Verma, a New Delhi-based partner at PKA Advocates, who reports that 90% of his clientele is made up of international clients.
“Although brand mattered to some extent in the past, individual reputation and the quality of service that one brings to the table is more important today,” says Vineetha MG, a partner at Samvad Partners. The 30-lawyer firm was formed earlier this year when eight-year-old Narasappa Doraswamy & Raja merged with V Law, which was set up in November 2012 by Vineetha, a former partner at AZB & Partners.
“Clients are not only cost conscious but more aware about quality, available options and are becoming increasingly brand-neutral,” says Akshat Pande, a co-founder of Alpha Partners, a one-year-old Delhi firm.
Status quo continues
That said, many of India’s largest and best known law firms – the likes of Amarchand Mangaldas, AZB & Partners, J Sagar Associates, Khaitan & Co, Luthra & Luthra, Trilegal and others – have built enviable brand names that are well known internationally as well as in India. These firms also maintain their dominance of top-end transactions.
In the first half of 2013, Mergermarket, an independent M&A data provider, reported that Amarchand Mangaldas was at the top of the legal adviser league table by deal value, with deals valued at a total of US$6.2 billion. AZB & Partners, meanwhile, topped the table for number of deals. It advised on 21 deals that appeared on Mergermarket’s list. The list includes all announced transactions valued at more than US$5 million, or if the valuation is unknown, where the target company’s turnover exceeds US$10 million.
Amarchand Mangaldas and AZB also dominate the market for antitrust services. Until around the middle of the year, Amarchand Mangaldas had filed 45 merger filings with India’s increasingly active antitrust watchdog, the Competition Commission of India (CCI), while AZB & Partners had lodged 26 such filings. No other firms come close to these numbers.
Antitrust is a practice area where several firms are working to sweeten their offerings to clients. Mumbai-based Talwar Thakore & Associates, for example, entered into a collaboration with Delhi-based Dhall Law Chambers, headed by Vinod Dhall, a former a former chairman of the CCI. Both firms have best-friend agreements with Linklaters.
“It combines Vinod’s leading competition law practice with our award winning corporate and finance practices,” says Feroz Dubash, a partner at Talwar Thakore & Associates.
There is also evidence that several smaller firms are getting in on the antitrust act. In April, Corporate Professionals, a 38-lawyer Delhi firm, obtained CCI clearance for the sale of a 22.5% stake in Future Generali India Life Insurance to Industrial Investment Trust. The seller, Pantaloon Retail, had been advised by Amarchand Mangaldas.
“Our firm has been active in the field of competition law for some time now, because of our strong M&A practice,” says Pankaj Singla, a senior associate at Corporate Professionals, who was involved in obtaining the CCI clearance.
Falling margins
Singla, who reports that international clients make up a small proportion (15%) of his firm’s clientele, says that pressure from domestic clients has driven down fees.
He is not alone. “The larger law firms, which have more mouths to feed, are doing work at throwaway prices, primarily to keep people busy,” remarks Akil Hirani, the managing partner of Mumbai-based Majmudar & Partners.
Indeed, firms of all sizes are grappling with falling margins as they face with the twin challenges of providing services for clients who are working with tight legal budgets, and plummeting demand for high margin services that used to provide the bulk of their revenues.
These challenges have varying impacts on firms. At Little & Co, one of India’s oldest law firms which emerged over a year ago from an acrimonious and costly merger with Fox Mandal, the managing partner, Jayendra Kapadia, says that while he is “worried about the mushrooming number of law firms” there has been little effect on his firm’s fees.
Pointing out that as clients almost exclusively focus on fees quoted while seeking out a law firm and pay little attention to the quality of services that will be provided, Justin Bharucha, a partner at Bharucha & Partners, remarks that firms such as his “are often approached after a mandate has been bid for … and the clients decide that they need a change of solicitor”.
Observing that the recent slowdown “has affected one and all”, Aseem Chawla, a partner at Delhi-based MPC Legal, says: “In the given challenging environment what matters is providing value and being able to understand the client’s needs and providing a sense of confidence to the clients.”
Some firms do this through ensuring that partners are seen to be rolling up their sleeves and working on briefs. At Juris Legal, a 10-lawyer, four-year old Delhi firm, Rupin Pawha emphasizes that his firm has “deliberately chosen to remain a boutique practice” so that it can devote “considerably more partner time to all our matters” than possible in a larger firm.
Meanwhile at J Sagar Associates, Berjis Desai says: “I am not worried about the falling margins, that we can deal with, we are worried about bad debts … in the coming two years this is going to be a big problem”.
While such bad debts could in turn result in firms taking on debt, Desai stresses that his firm has “never incurred a single rupee of debt” and has always had a cash surplus.
Right place, right time?
Intellectual property boutiques continue to prosper even as storm clouds gather over the rest of the market
Even as India’s legal market takes a beating, the lawyers and law firms that specialize in IP law have found that they are in increasing demand. Yet this is another area where the younger and more nimble firms are growing in confidence.
For example, Saikrishna Rajgopal, the managing partner of Saikrishna & Associates, reports that while his firm has been “growing exponentially” over the past three years, the last 12 months have seen its individual practices expanding rapidly. These include teams dedicated to transactions, telecom patent litigation and competition law.
Younger lawyers and law firms are increasingly making their mark in courts across the country, in many cases going head to head with large established IP firms such as Anand and Anand, Remfry & Sagar, K&S Partners, Krishna & Saurastri and Lall Lahiri & Salhotra.
“Most of our major victories in the courts or before the Intellectual Property Appellate Board [IPAB] have been against big odds and for clients who have kept the faith in us despite being warned that clout and name were all that mattered in the Indian legal market,” says Shwetasree Majumder, the managing partner of Fidus Law, which was set up in 2008.
The presence of the new players hasn’t gone unnoticed by the old guard. “On the one hand, as a firm we welcome good healthy competition. It raises the bar and you don’t get people misleading the court with nonsense,” says Pravin Anand, the managing partner of Anand and Anand, which has a lineage of practice stretching back 90 years. “But at the same time, if there are too many lawyers in the field it may not be good for the [litigation] system … if there is not much work coming in, there is no incentive for the lawyer to work towards a settlement … cumulative effect is that matters do not settle”.
Busy days ahead?
In spite of the generally positive sentiment among IP practitioners, India’s intellectual property firms are not totally immune to the economic downturn. “There is a slowdown in incoming work,” says Vaibhav Vutts, a partner at Vutts & Associates, who adds that “the work from domestic clients has been increasing and the two are offsetting each other at this stage”.
The biggest development for IP firms involved in prosecution work has been the recent implementation of the Madrid Protocol in India. This has introduced a procedure whereby companies can register trademarks by filing one application in one office, with potential coverage across 90 territories.
Jatin Trivedi, the managing partner of Ahmedabad-based YJ Trivedi and Co, says he expects the firm to get more opportunities to file international applications. “The firm has a strong base of clients who are willing to go for international registration. Moreover, several other companies from different jurisdiction have started to approach the firm for the same.”
Srinath Srinivasan, a partner at LR Swami in Chennai, is just as optimistic. “We have already been contacted by many clients regarding India’s accession to the Madrid Protocol in view of the wide media coverage”.
Meanwhile at Remfry & Sagar, a firm with a large foreign client base, managing partner Ashwin Julka says that while he does “not expect a deluge”, the first companies to take advantage of the Madrid system in India are likely to be “the large corporations we work with which have interests across the globe”.
Shortage of experts
With an abundance of IP work, finding enough suitably qualified lawyers has become a problem for some firms.
“I would believe even today it is not easy to get trained lawyers in IP,” says Rajeshwari, a partner at Rajeshwari & Co, and a key player in several recent patent battles. She believes that there is a need for greater training and suggests that “the only option” is to recruit people straight from university and to train them.
Selvam & Selvam, reports that plans to set up an office in Delhi had to be put on hold as the firm was “having a tough time finding the right associates”. Raja Selvam, the managing partner at the firm remarks that “many freshers have a misconception, thanks to misleading articles all over the internet,” that they will be paid much more than they can actually expect.
Despite such issues most firms are confident that the future holds little surprise. “The prognosis for niche firms like ours is that most will remain boutique and small to mid-sized,” remarks Nandan Kamath, managing partner of Law offices of Nandan Kamath, a sports, media, technology and IP practice.
Innovative billing
With legal fees under pressure, fixed rate billing has become the norm in some more commoditized practice areas such as project finance.
There is also a perception that fixed fee billing helps “ensure we run a tight ship and that the client is not penalized for lawyer inefficiency,” explains Freddy Daruwala, a partner at Mumbai-based Nasikwala Law Offices. In any case, firms routinely report that billing can be a challenge.
“Due to client demands the market has been witnessing … innovative billing models,” says Hemant Sahai, the managing partner at HSA Advocates. Sahai reports that the 68-lawyer firm, which has been increasing its revenues at “approximately 38%” each year, focuses on the value that it provides. While firms are not allowed to charge success fees, Sahai says HSA Advocates has sometimes charged a value-linked fee. It has also given discounts in the form of credit notes.
Fixed fees appear to be the norm in specialist practice areas such as intellectual property. For example, Gunjan Paharia, the managing partner of ZeusIP, reports that fixed fee billing is becoming more common at the firm and that 30% of the firm’s clientele is currently billed in this manner.
However, hourly billing continues to be used. Karnika Seth, a partner at Seth Associates in Noida, says although fixed rate billing has shown an increase, particularly for international clients, hourly billing accounts for half of the firm’s billing. “Some clients pay stage wise fixed fees and some prefer to pay hourly rates,” says Seth.
Amir Singh Pasrich, the managing partner of ILA Pasrich & Company, reports that billing by his firm is “hardly ever fixed fees” as “this has not always worked for the firm and the work generally expands far beyond the original estimates”.
Possible layoffs?
While there is a squeeze on recruitment, several observers say that the current bleak situation could result in lawyers being laid off – a possibility that most firms deny, pointing out that layoffs do not lie easily with the cultural and philosophical sensibilities of India. However, the reality is that some firms are already easing out lawyers who ostensibly do not meet their performance standards.
“If a person is consistently not able to perform, we are trying to redeploy them and if it is not possible, then [while] we have not consciously asked anyone to go so far – maybe barring an exception here or there – the person himself gets the message and opts out,” says Desai at J Sagar Associates. “I will not be surprised if within a year’s time we see layoffs”.
Meanwhile, Shuva Mandal, the managing partner of Fox Mandal in Bangalore, reports that “the deputation of resources on a long-term basis” is an important trend and that “has helped us serve our clients as virtual in-house counsel”.
Lexcellence, a small firm based in Noida, reports it has a novel method of managing manpower: It forms a team of lawyers to act on each brief that it receives. When the work is over or the brief is not renewed the team is disbanded and the lawyers are free to work elsewhere.
“To my knowledge, we are the only ones who do this,” says Nitin Sen, a partner at the firm.
Clearly, the ability to innovate will be vital as firms come to terms with the pressures of the market.
Turf wars
There is vast untapped demand for legal services from mid-size and small companies that populate the hinterlands of India and from international clients. This has resulted in a situation where India’s law firms face competition from company secretaries and chartered accountants.
However, only lawyers can provide legal advice within India as stated in the Advocates Act, 1961. In addition, as Daruwala at Nasikwala Law Offices points out, an August 2010 Madras High Court ruling unequivocally states that “a chartered accountant is not a competent person to practise as a counsel to represent the petitioner before the competent authority”.
Faced with such challenges, the Society of Indian Law Firms (SILF), which currently has a membership of 120 firms, continues to act on behalf of the country’s legal fraternity. SILF reports that it has had a meeting with the law minister and with the minister of corporate affairs to bring attention to the situation.
“They were not aware that this is happening and it has come as a shock to them,” says Lalit Bhasin, the managing partner of Bhasin & Co, in his capacity as president of SILF. Bhasin adds that SILF will not “give in to anybody trespassing on our turf” and that if nothing changes they will be going to court by the end of the year.
Commenting on the situation, Vinod Surana, the CEO of Chennai-based Surana & Surana says: “With SILF and the Bar Council gearing up to take action on all those players who are not authorized to practise law … and rising costs like real estate and salaries … it will be interesting to see how [these players] evolve as credible, cost-effective alternatives to most of what law firms do”.
Cutting family ties
As many entrepreneurial lawyers across India set up shop on their own, some are choosing to move away from the family-run model that is still followed by most Indian firms.
Shalini Agarwal, a former partner at Clasis Law and before that at ALMT Law, says: “In India it’s not a glass ceiling it’s a rock solid ceiling … unless you are part of the inner circle whether it’s family or whether it’s founding partners, the chances that you are going to make it to real equity are so slim and firms are run pretty much on personal whims and fancies.” Agarwal, who recently set up In Se Legal, has a base in both the UK and India, where she has strong links with Khaitan & Co.
“We have a strong anti-family policy that is written down,” says Parikh at Verus. Adding that the firm is “very, very clear” that it is not going to be a family firm, Parikh says that the firm also has a “well defined career progression path”.
While such steps are commendable, only time will tell if this will help to keep India’s emerging firms in the game.
“It is clearly a developing market and no one is quite sure who the top fliers are going to be in 10 years,” says Nick Robinson, a fellow at Harvard Law School’s Program on the Legal Profession, who has considerable knowledge of India’s legal and judicial systems. The only thing that seems certain is that interesting times lie ahead.
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