If you look through the irritants, India is a terrific opportunity: Cyril Shroff

Image: Mexy Xavier

Almost a year after India’s largest law firm Amarchand Mangaldas split in May 2015, its former managing partner, Mumbai region, and leading corporate lawyer Cyril Shroff is back to doing what he does best—advising companies on how to deal with litigations, mergers and acquisitions (M&A) and routine regulatory matters. Post the split, the two firms—Shardul Amarchand Mangaldas led by brother Shardul Shroff and Cyril Amarchand Mangaldas—will be competitors: Cyril, 56, has entered the Delhi market while Shardul, 60, has entered the Mumbai market. In an interview to Forbes India, the founder and managing partner of Cyril Amarchand Mangaldas talks about how foreign investors will soon be back in India due to lack of opportunities elsewhere. Edited excerpts:

Q. There has been a clear deceleration in foreign investor interest in the last quarter. Have you seen that among your clients?
Both waning and deceleration are incorrect words. It is a wait-and-watch approach. If you look at it from a foreign investor’s perspective, the fact is that there aren’t too many opportunities in the world. We are the only large economy that is growing and they know that. So while the interest is high, there is concern whether India really means it in terms of having a welcoming framework—whether it is foreign direct investment (FDI) or regulatory approval or tax. But from a macro point of view, India is a very attractive target.

Q. But this government has not tackled a host of issues—for instance, retrospective tax.
There is no excuse for that. There is a disconnect between the political face and bureaucratic reality. And that is bothering people. But if you look through these irritants, India is a terrific opportunity at this point.

Q. How much of the wait-and-watch approach is due to global factors (stock markets have declined worldwide in the last three months) and how much is because of India factors?
It is more due to the India factors. It is also because in most of these investments, there is an Indian partner and most of them have a debt problem. This is both a challenge and an opportunity: A challenge because they don’t want to invest, and an opportunity as a lot of M&As will come out of this. If I look at a 12- to 18-month forecast, a lot of M&As will come out of stressed debt situations. Greenfield [new] projects will be a challenge and so I have a question mark on the Make In India initiative. The Greenfield element is too dependent on ease of doing business. It is okay to say FDI rules have changed, but nothing has changed with the micro approvals needed.

Q. Will the process be made easier with the Bankruptcy Code?
I think it will be a game changer, but by the time it has practical implications, it will be more than 18 months—first the legislation has to be passed, the rules have to be framed, then the infrastructure i.e. the agencies need to be set up and staffed.  

Q. How concerned are investors about nothing moving on the legislative front?
There is a lot that can be done in a non-legislative way to move forward. The Goods and Services Tax (GST), Land Bill and the Bankruptcy Code have to be passed through the legislature. Moving these as money bills [and not having them voted in the Rajya Sabha] is not a sound idea.

Q. Real estate is a stressed sector. What is the way out for it?
First, projects need to be completed. Haircuts have to be taken. It is a builder-by-builder approach. For private equity (PE) funds, this is a good opportunity. Blackstone and Piramal are picking up assets. We are seeing more real estate PE activity in the south.

Q. About the bank non-performing assets (NPA) issue, the debate is between recapitalising and taking decisions on the policy front. Where do you stand on this?
I am in favour of what is going on at present: Take the hit and clean it up. But there is a feeling that there is too much too soon, and that the medicine may render the patient comatose. The government will have to fund the banks in the short term; that we are not seeing clearly as yet. But on the ethics of cleaning up banks, there can be no argument. Banks will get ruthless in terms of their recovery. And I can start to see them get nasty. I think they will send some people to jail. And there will be M&As as these assets will have to be sold.

Q. Post the split with your brother, what is the road ahead for Cyril Amarchand Mangaldas?
The transition has been seamless. Our relationships with our clients have continued. In terms of being able to adapt to the marketplace, it has been hyper competitive as there is one more new competitor. In the long term, we are focusing on building structures and a culture within the organisation, for which we are working with the Boston Consulting Group. That involves relooking at our entire portfolio and seeing how to keep it profitable and relevant.

Q. The legal industry is also going through a transition.
In times like these, firms have to reinvent themselves. There are some practices that are counter cyclical, such as litigation and restructuring. The complexity of regulations provides a lot of opportunity. Traditional deal-making is challenging, but with the complexity, there is a bias in favour of large firms. The deal environment is becoming more complex and sophisticated. Yet we are not seeing consolidation among law firms because in India, professional services are not priced properly.