India’s ‘national’ law firms are beefing up their practices in the south of the country. Lucrative manufacturing, IT and real estate deals beckon, but do the Delhi and Mumbai powerhouses have what it takes to compete with the local specialists?
South India has long been considered a relatively impenetrable territory by Indians from elsewhere seeking to do business there. According to Hindu marriage traditions, north Indians generally seek to forge links outside their extended clans while south Indians prefer to bolster ties within them.
Such insularity has long been a barrier to India’s large law firms, most of which are based in New Delhi or Mumbai. Until recently Amarchand Mangaldas was one of the few national firms to have any presence at all in the south of the country.
But a sea change occurred as south India’s economy soared on the back of manufacturing, technology and real estate booms, and national law firms began following their clients to the region. “The initial frenzy to set up south Indian offices was motivated by a desire to retain IT and ITES [information technology-enabled service] clients in Bangalore and Hyderabad,” says Vivek Durai, the co-founding partner of Atman Law in Chennai, which is in the process of merging with a Delhi firm. “The second run largely focused on the real estate boom and real estate-specific investments across south India.”
Recent months have seen a wave of mergers and acquisitions between national and south Indian law firms, and several new office openings in the south of the country. As a result many of the large Delhi and Mumbai firms now boast significant presences in the major southern cities of Chennai, Bangalore and Hyderabad. Most Chennai clients are domestic companies, while Bangalore is home to multinational clients and funds. Hyderabad focuses on real estate and infrastructure and, increasingly, is a player in the technology sector.
“The quality of education and a highly qualified workforce has long been the biggest incentive for multinational companies to set up operations in the south,” says Rahul Matthan, a partner at Trilegal in Bangalore. “This, along with a fairly well-developed infrastructure system and a strong pro-investment climate has helped southern states attract both domestic and foreign companies.”
Marriages of convenience
In mid-2009, Mumbai-based law firm AZB & Partners announced that it had merged with a southern firm, Anup S Shah & Associates, creating a Bangalore office – in leafy Lavelle Road – with more than 40 lawyers and an immediate presence in Chennai and Hyderabad. In 2010 the merged entity will move to purpose-built premises on Cunningham Road in Bangalore’s old Cantonment neighbourhood.
The synergies were obvious. AZB, hobbled by the recent loss of two key Bangalore partners, needed to rebuild its southern practice, while the real estate-focused Shah wanted to create a corporate practice. “We value Bangalore as a jurisdiction,” says Abhijit Joshi, a Mumbai-based partner at AZB & Partners.
At around the same time, AZB’s Lavelle Road neighbour, J Sagar Associates (JSA), acquired a different Bangalore firm, M&C Partners, doubling its presence in the city to nearly 40 lawyers. “The south is very important to us,” says Sajai Singh, a Bangalore-based partner at JSA.
In many cases, the smaller firms hope to gain from their larger partners’ economies of scale. The larger firms, meanwhile, strive to acquire expertise in practice areas they might otherwise have taken years to build. In the case of JSA, M&C provided readymade real estate and litigation practice groups. Singh says the merger was largely seamless once practice areas were parcelled out. “We had to get our systems working together,” he says.
Other recent tie-ups have been more like marriages of equals. For example, neither Chennai-based Atman Law nor its Delhi-based suitor, Salvus Partners, are heavyweights in their own right. Together, however, they can offer services on a more national scale. “In addition to the obvious territorial spread, Salvus would add value by complementing Atman with its dispute resolution and transactional work,” says Shailesh Madiyal, a partner at the Delhi firm. In exchange, Salvus hopes to make use of Atman’s expertise in technology.
Voyages of discovery
Amarchand Mangaldas led the march south in 1991, when Mumbai-based partner Vandana Shroff launched the firm’s Bangalore office. Today the firm has 52 lawyers in Bangalore, led by resident partner Reeba Chacko, and boasts one of the largest legal offices in the city. Its Hyderabad office, which opened in 2004, has a further 14 lawyers.
Thakker & Thakker was another pioneer, opening a Bangalore office in 1992. Managing partner Bijesh Thakker describes the time as the “nascent days of post-liberalization” in India. “With the onset of the IT and ITES wave in India, Bangalore emerged as a hub for technology business in India,” he says. “We foresaw having a Bangalore office to enable us to truly be a one-stop-shop for our technology client base.”
Since then, many other firms have opened offices in the south. They include ALMT Legal; Dave & Girish & Co; Dua Associates; FoxMandal Little; India Juris; Khaitan & Co; Kochhar & Co; KR Chawla & Co; Lakshmikumaran & Sridharan; Luthra & Luthra; Mulla & Mulla & Craigie Blunt & Caroe; MV Kini & Co; Seth Dua & Associates; Singhania & Co; Singhania & Partners; and Titus & Co.
The latest addition is Delhi-based Wadia Ghandy & Co, which launched a Chennai office in August under a former Mumbai partner, Shona Malvi. The firm already has a Bangalore office. “Our firm opened offices in Bangalore and Chennai for two main reasons,” says Malvi. “We had a number of clients located in or around these cities who would be better served from a local office. Secondly, we believe that these cities offer considerable scope for growth and excellent local talent.”
Newer firms have tended to forge an immediate southern presence. Trilegal, founded in 2000, launched simultaneously in Bangalore as well as Mumbai and Delhi. “From the very beginning our vision was to establish a national firm with offices in the principal jurisdictions of the country,” says Matthan. “We knew technology had to be a part of that business plan and it was natural that Bangalore should be the focus of that practice.”
Local knowledge v national clout
The southbound rush has provoked mixed reactions from southern law firms. While some have welcomed the opportunity to cooperate or merge with the new arrivals, others remain sceptical that the rush will outlive the current boom. “It remains to be seen if these ‘national’ firms have the steam required to develop rich south Indian practices,” says Durai.
“Delhi and Mumbai-based firms have struggled to effectively service clients in southern India, with few notable exceptions,” Durai continues. “Those that have succeeded have managed to do so only by encouraging strong entrepreneurial local partners to run their southern offices.”
National firms retort that their offices in the south are well-endowed with local knowledge and sufficiently familiar with the regional quirks (see Different Strokes).
The south India offices of national firms “can bring to the table more depth and knowledge in relation to regional and local matters including local laws, regulations, and customary practices,” says Shailendra Komatreddy, a Hyderabad-based partner at Dua Associates. “This value addition may not be possible for firms practising only out of Delhi or Mumbai.”
However, larger firms acknowledge that successful southern bureaus are often based around a key partner. “The head honcho needs to be a local figure,” says Joshi at AZB.
Another issue is relocation. Getting lawyers to move from north India to south India is difficult unless they have roots there. “Relocation is not a very preferred option,” adds Singh at JSA. “The firm would like it but individuals don’t.”
Meeting client demand
The move south has not gone unnoticed by the legal fraternity in north India. The Delhi-focused Society of Indian Law Firms, for example, is trying to enlist more members in the south by establishing Bangalore and Hyderabad chapters and hosting events in Chennai.
There has been some speculation that the positioning is designed to create truly national firms better able to withstand the entry of the society’s arch-nemeses: foreign law firms. But Joshi says AZB’s international ally, Clifford Chance, played no part in the decision to merge with Anup S Shah & Associates. “We discuss a lot of issues regularly but they did not really have any input,” he says.
Indeed, most of the expansion in the south has been client-driven. In 2007, Trilegal partner Atul Bhatia opened the firm’s Hyderabad office. “As we began to service more clients in Hyderabad, we began to feel the need to have a physical presence there,” says Matthan. “The Hyderabad office was a natural consequence of that growth.”
“Our south India offices are important because our clients have an important and crucial presence in south India,” says Rodney Ryder, a Chennai-based partner at Kochhar & Co, which also has a Bangalore office. The firm acts for several south Indian brands such as Amara Raja Batteries, Odyssey Retail and the Deccan Chronicle media group.
Indian clients back up the theory, saying they favour the use of local lawyers whenever practicable. “For all cases filed by us or against us in south India, we prefer to use lawyers from south India,” says Uday Baldota, vice-president for investor relations at Mumbai-headquartered drug-maker Sun Pharmaceutical Industries. “They’re more effective and economical on a total cost perspective.”
Second-tier cities gain prominence
Although Chennai, Bangalore and Hyderabad are the major growth centres in the south, second-tier cities are also on the rise, with lawyers paying increasing attention to the industrial heartland of northwest Tamil Nadu around Coimbatore, Tirupur and Erode; Madurai and Tiruchirapalli (Trichy) in central Tamil Nadu; Kochi (Cochin), Kozhikode (Calicut) and Thiruvananthapuram (Trivandrum) on the Kerala coast; and the Bay of Bengal seaport of Visakhapatnam in Andhra Pradesh.
Even the tiny Union territory of Puducherry (Pondicherry), an enclave south of Chennai ceded by France to India in 1961, is getting in on the act. The territorial government, instead of eliminating signs of Pondicherry’s colonial past, has been playing it up, encouraging French culture and tourism and, more importantly, investment. Puducherry’s sole practitioner lawyers such as Usha Vassoudevayar have had to brush up on joint-venture and foreign investment regulations as a result.
Many smaller Indian cities are seeing a surge of investment and growth that has translated into larger billings for law firms. Altacit Global, a Chennai-based IP boutique with a Bangalore branch, has just opened an office in Coimbatore in response to client demand. “Many transnational and multinational enterprises have set up business in Coimbatore,” says chief executive officer Sudhir Ravindran. “We opened an office to both provide services for existing clients and to tap the potential market.”
With a population of more than 1.5 million, Coimbatore is hardly just a dot on the map. Singh at JSA says it’s a potential hot spot for his firm. The city has seen growth among Indian companies – Altacit Global’s client Sterna Security, once a small locksmith based in Coimbatore, is now one of south Asia’s largest security systems manufacturers – and is attracting interest from multinationals as well. In October, the French government announced it was looking at investment opportunities in the city. “We want to know the expectations of cities such as Coimbatore,” says Pierre Fournier, France’s consul-general in Puducherry.
Coimbatore also underscores both the ambitions and limitations of Indian lawyers outside the major metropolitan centres. R Chellimuthu, a sole practitioner in the city, has been the Coimbatore representative of Chennai-based Ramalingam & Associates for the past eight years. Affiliating with a law firm, he says, was a smart decision that enabled him to grow his 20-year-old practice and attract referral clients from Chennai. That, he says, has led to even more business – especially in property – from Bangalore and Mumbai. “We’ve seen gradual growth in real estate,” he says.
About 10 kilometres away in suburban Kongu Nagar, R&P Partners (formerly Rangarajan & Prabhakharan) is another regional firm with a Coimbatore presence. Partner S Elango says firms like his fill an important niche, advising on the increasingly different laws between India’s states. R&P, though not a large firm, is one of the closest entities to a true southern practice. It has seven offices in all four major states: Bangalore in Karnataka; Chennai, Coimbatore and Madurai in Tamil Nadu; Hyderabad and Visakhapatnam in Andhra Pradesh; and Kochi in Kerala.
“From our experience, we notice that most law firms from the north have failed to succeed in a manner and scale in the south as one would normally have expected,” says R Vijay Anand, an R&P partner in Chennai. He blames their “inability or otherwise to hire good local talent and failure to adapt to the local conditions”.
But R&P’s lawyers are realistic about the limits to how much firms in smaller cities can really grow. “It’s really about how immature the law firm concept is in India,” says CS Krishnanunni, an advocate with the firm. “It’s at odds with growing globalization,” he adds, noting the increase of investment from Mumbai and Bangalore and the establishment of several Arab banks in the city.
One city in the south that has tried to embrace globalization is Kochi. Dubai’s Tecom Investments is involved in the construction of a US$400 million “smart city” in the historic Kerala port (although the financial meltdown in the Gulf has delayed the project), while the much-awaited Vallarpadam container trans-shipment terminal nearby is due to become operational in 2011.
Kochi – and adjacent Ernakulam – are among the fastest growing cities in India. Singh at JSA sees great potential in Kochi, even though it’s not the largest city in the state. “It’s more an aesthetic than practical issue,” he concedes. Its nearest rivals, Alappuzha (Aleppey) and Kozhikode, are much grittier while the state capital, Thiruvananthapuram, is far to the south.
So far, FoxMandal Little is the only major national firm to open an office in Kochi, leaving most of the field open to regional players such as R&P Partners, and established local firms such as Menon & Pai and Joseph & Kurian, as well as newcomers such as Veritae Legal. “One major feature of Kerala law firms is that they are highly localized, with their roots inside Kerala,” says Philip Mathew, senior partner of Philip’s & Co, another key Kochi firm.
Over the past few years, Philip’s & Co has counteracted the constraint of Kochi’s limited domestic market by developing a thriving outsourcing practice for US and British law firms. That, says Mathew, has made it an acquisition target. “Some national law firms and foreign firms have shown interest in taking over Philip’s & Co.”
Southern innovation, it should be noted, can have unintended consequences.
Understanding the cultural norms of traditionalism, thriftiness and loyalty is crucial to doing business successfully in south India
The distinctions between south India and the rest of the country are not well known internationally. Most foreign visitors might notice little more than slightly cheaper prices than in Delhi or Mumbai, the abundance of coffee and rice, and less extreme weather.
For Indians, however, the distinctions can be crucial. “Thinking that what works in the north will also work in the south is a mistake,” says Abhijit Joshi of AZB & Partners, a Mumbai-based firm with a growing southern presence. “India is more like the European Union than a single country.”
South India comprises four major states – Andhra Pradesh, Karnataka, Kerala and Tamil Nadu – which account for roughly 20% of both the country’s population and its land mass. Ayurveda therapy, Carnatic music, call centres and the masala dosa are all globally known exports from south India, as are, more recently, Slumdog Millionaire composer AR Rahman and Mangalore-born actresses Aishwarya Rai and Shilpa Shetty.
India’s north-south division is partly a linguistic one: the main Dravidian tongues – Tamil, Kannada, Telugu and Malayalam – have completely different origins to Hindi, an Indo-European language. Indeed, many Indian states, such as Karnataka and Andhra Pradesh, were created or redrawn in the 1950s along linguistic lines.
The language differences are particularly important in the legal industry. “Language is a key issue for lawyers,” says CS Krishnanunni, an advocate with R&P Partners in Coimbatore. Lower courts often conduct cases in the vernacular language, making it difficult for non-local lawyers to appear. “It would be hard for me to be an effective lawyer in, say, Bangalore,” he adds.
Cultural issues also influence the practice of law. “On average, [lawyers in] the south, being more conservative, have a tendency to be more committed and look at job security,” says Ajesh Kumar S, chief of Bangalore firm AKS Law Associates. “In the north they are more risk-taking and adventurous.”
The conservative label can also apply to clients, especially when the invoices are dispatched. “Clients from the south are still not used to paying the fees that the clients from the western and northern regions are used to paying for similar services,” notes Mahesh Thimmaiah, a partner with MD&T Partners, another Bangalore-based firm.
“The south is more traditional in its business practices,” says Sajai Singh, a partner with J Sagar Associates in Bangalore. “Companies in the north and the west find it easier to accept new ideas.” While southern traditionalism can be frustrating to the more aggressive and less risk-averse northerners, Singh says the upside of a traditional outlook includes stability.
Other observers note that south Indian companies and law firms place a greater emphasis on loyalty than their northern counterparts. “In the south a lawyer is identified as a part of the family, even if it’s a firm,” says BC Thiruvengadam, senior partner of Thiru & Thiru, one of Bangalore’s oldest local firms. “Mumbai and Delhi firms lack local feeling and understanding.”
An exception to the conservative rule is dispute resolution, with clients in the south being rather more litigious than their northern cousins. “Southern firms are predominantly litigation-oriented, and are [only] more recently catering to corporate work,” says M Dhyan Chinnappa, a partner with CrestLaw Partners in Bangalore.
Some lawyers see their southern counterparts as somewhat unpolished. Vandana Shroff, a partner at Amarchand Mangaldas in Mumbai, says staff hired from the south benefit from two-year stints in Mumbai or Delhi as a kind of finishing school. “They learn decorum,” she says. “[Then] they’re better able to deal with clients and work better under pressure.”
Of course, not every lawyer looks for pressure. The south, often considered more laid-back, can provide a better working environment. “Life is much easier in the southern region and it is professionally very fulfilling,” says Elizabeth Puthran, an advocate with Chennai IP firm Puthran & Associates, which has opened an office in Thiruvananthapuram.
Most agree that the south is a lot less provincial than it used to be. The rise of the technology sectors in Bangalore and Hyderabad have brought in more northerners, overseas Indians and foreigners. It has also brought more sophistication to law firms: Bangalore can now support home-grown technology boutiques like Narasappa Doraswamy & Raja or IP specialists such as Meta Yage.
“Think mean, lean [and] clean,” says Binu Radhakrishnan, managing director of Kris & Kolloth, a Bangalore-based IP and technology boutique with an office in Delhi. “Southern-based law firms are grown out of entrepreneurs and legal talent. A national law firm with southern offices is more of an extension of their brand identity than an actual market presence.”