 "Cyril Shroff")
It has been more than a year that the country's largest law firm was replaced with two new firms - Shardul Amarchand Mangaldas & Co. and Cyril Amarchand Mangaldas. Sudipto Dey caught up with Cyril Shroff, managing partner, Cyril Amarchand Mangaldas (CAM), on the firm's journey since the re-launch, the impact of entry of foreign law firms and changes in the corporate litigation landscape. Edited excerpts:
Last year you had indicated plans to be a 1,000-strong lawyer firm. Where are you in those plans?
In the last one year our headcount has grown, we are now about 630 lawyers. It is not a race for numbers for its own sake. We aspire to be the top legal services firm in Asia by 2025, delivering world-class service to our clients through size, practice coverage and quality. We are currently focusing on profitability and the number of lawyers is only relevant if it delivers profit, by leverage (i.e. partner to associate ratio). Emerging markets, like India, are fee-sensitive. The challenge is to arrive at an optimal leverage ratio that ranges between 1:4.5 and 1:6. The gap between us and the next firm is over 200 lawyers.
So, you are not looking at increasing the number of lawyers?
At this juncture our primary focus is on profitability. We may look at increasing the number of lawyers at a later stage.
Given the recent partner churn in the industry, how challenging has it been to manage the firm over the last few months?
Several third-party reports have validated that we continue to be at the top in every practice area by a big margin. Maintaining our top position has not been easy. But it has been exciting.
Despite the turbulence, we managed to keep the real core of the firm together. Every major firm in the fraternity has been affected by the churn. But on a net basis we have gained significantly.
Looking back, is there anything you would have done differently?
I always look ahead. Our main goal was to maintain the No. 1 market position and our strategy over the last year has obviously worked.
How do you look at the issues around the entry of foreign law firms into India?
Our institutional response to the draft rules proposed by the Bar Council of India is being prepared by the Society of Indian Law Firms. Personally I would welcome it if it is done in a structured and phased manner, with proper safeguards.
What is your assessment of the impact that the opening up of the legal services will have on domestic legal fraternity?
India is a bright spot among the emerging economies. Given the opportunities in the country, I expect many dual qualified international lawyers to come back to India over the next 12 to 18 months. The United Kingdom has been a big destination for Indian legal talent. With Brexit, I expect legal talent to head back to India over the next two-three years. Indian law firms will have to heavily invest in technology, spruce up their business support services - something we have done over the years - to bridge the gap between them and foreign law firms. Firms that are under-invested on technology will get overwhelmed by foreign firms, very quickly.
Do you see any changes in the corporate litigation landscape, now that we have the Bankruptcy Code, the NCLT in place, while efforts are on to have GST by next year?
An easier and speedier mechanism for settling insolvency is what the market needed. The real change will only be seen once the various systems and infrastructures proposed under the Code are in place and work cohesively. The Bankruptcy Code will transform the way corporate and investors plan, implement and assess their business. The litigation landscape will change a lot. It is a priority practice focus for us.
Debt re-structuring and sale of distressed assets has occupied the minds of many corporate promoters. When could we expect a change in business sentiment, and an uptick in corporate investment?
Admitting to your debt problems in itself is reflective of a change in business sentiment. Given the uncertainty in the market I think at least a year more for an uptick in corporate investment. We are seeing some green shoots.
To what extent does the much expected general improvement in business sentiment dependent on the process of recapitalisation of public sector banks?
The banking system needs to heal itself to restart the investment cycle. Currently the private equity industry is providing capital in a big way.
Given the flux in the global market, how do you expect the domestic M&A scene to pan out in the coming months?
Statistically, 2015 was the best year for global M&A market. This should hopefully continue in 2016. Domestic activity should improve, especially around restructuring. I think most of the M&A will be from Indian hands to Indian hands with stressed asset resolution as a prime motivation. Foreign buyers will take time, since there are unresolved issues and concern about diligence and governance.
