India Practice Lawyers See No Quick End to Downturn
There were sighs of relief in India last week when Federal Reserve Chairman Ben Bernanke unexpectedly announced the U.S. central bank would continue buying Treasury bills and other government securities at a rate of $85 billion a month. Worries over the past few months that investors would flee riskier emerging markets like India in anticipation of better yields on “safe” Treasuries had sent the rupee and India’s major stock exchanges plummeting.
But the Fed’s action was the one note of good news for an Indian economy that is still in crisis. The Indian government this month cut its gross domestic product forecast for the current fiscal year to 5.3 percent from 6.4 percent. India had already seen GDP growth fall from 8 percent in 2010 and 2011 to just 5 percent last year, the worst number in a decade.
“India’s gone through some downturns before, and this [most recent] one has hit investors really hard,” says Shearman & Sterling Hong Kong partner Sidharth Bhasin. “They’re questioning the whole India story.”
That’s not good news for law firms that only two years ago looked to India as a major growth market. Bhasin, like many other lawyers who do India-related work, are quick to say they are not giving up on the country. After all, it is still Asia’s third-largest economy and, even at lower growth rate, opportunities exist.
But the slowdown has been felt.
“The activity levels are significantly less, so I think everybody’s feeling the downturn across all practice areas, whether you’re an international firm or a domestic firm,” says Dorsey & Whitney Sydney partner John Chrisman, who handles India matters for the Minneapolis-based firm.
Herbert Smith Freehills Singapore partner Nicola Yeomans points to a noticeable drop in outbound deals from the country’s larger companies. “We don’t see that work anymore,” she says of deals like Tata Steel’s $94 million investment in Australia’s Riversdale Mining in 2007, which saw the Indian company sell its stake for $1.1 billion four years later. “That was keeping me really busy–maybe half my practice at the time, all Indian outbound acquisitions.”
The work that remains is subject to even more fierce competition.
“It puts pressure on firms who are not the first or second phone call,” says Milbank, Tweed, Hadley & McCloy Singapore-based Asia managing partner David Zemans. “I think there’s a flight to quality in a challenging market.”
Many Singapore-based India lawyers say they have dealt with the lull by focusing on work elsewhere in the region. For Latham & Watkins Singapore partner Rajiv Gupta, that means more transactions in Thailand, Malaysia, Indonesia, and Singapore.