Why do some of India’s national law firms find Hyderabad such a challenging market? Rebecca Abraham reports
The June 2014 bifurcation of Andhra Pradesh resulted in the birth of Telangana and was a long time coming. It set the stage for competition between the two states on several fronts including creating investor-friendly policies.
Both states recently topped state-wise ease of doing business rankings, put together by the Ministry of Commerce and Industry. The Telangana State Industrial Project Approval and Self-Certification System (TS-iPASS) Act, 2014, rolled out soon after the state was created, and was instrumental for it receiving investment proposals worth ₹1.18 trillion (US$17.8 billion).
Andhra Pradesh, meanwhile, signed 734 memorandums of understanding, involving investments of about ₹4.39 trillion, at a three-day investment summit in February. The state’s chief minister said 59% of investments that were similarly promised in the past three-and-a-half years had come in.
As a result, Hyderabad, which is currently the capital of both states, is a hive of activity as investors compare the benefits of investing in Telangana and Andhra Pradesh.
A SHORTAGE OF TALENT?
Yet national law firms are wary of opening an office in the city, and those that have offices maintain a skeletal presence, often due to an inability to hire suitable lawyers.
The partners who headed the offices of Cyril Amarchand Mangaldas and Trilegal in the city have recently resigned. Trilegal, which had six lawyers in the city, has closed its office.
“We tend not to have helicopter management,” says partner Rahul Matthan, a member of Trilegal’s management committee. He points out that the firm decided to exit after it could not find a replacement for Pavan Kumar, the partner who had resigned. He adds that closing the office “is not a comment on the city or the state”, but strengthening the firm’s offices in other cities has been easier.
On the other hand, Luthra & Luthra, which has been in Hyderabad for the past three years, moved to larger premises in February. The office currently has two partners, who focus on litigation and real estate work.
“Our office in Hyderabad is working well and it has been a good experience,” says Rajiv Luthra, the managing partner of Luthra & Luthra. He adds that while lawyers are flown into Hyderabad as and when required, the firm has expansion plans for its office and is seeking the right people.
This may prove to be a challenge as long as the offices of national law firms act as post offices where only very routine legal work is executed. The exodus of lawyers from firms is expected to continue until then.
Hyderabad is home to one of India’s most elite law schools, Nalsar University of Law. However, young lawyers tend to move to law firms in Mumbai and Delhi to seek out more innovative and interesting work.
Full-service firm Altacit Global, which has its head office in Chennai, is another newcomer to Hyderabad. The firm has five lawyers in the city and has had a positive experience. Managing partner Sudhir Ravindran says the office broke even within a year-and-a-half – which is half the time it took when the firm established itself in Coimbatore – partly due to its set of anchor clients. He strongly believes that finding local expertise is critical, not least because “the client does not want to pay for lawyers to fly in and out”.
Yet, expectations with regard to fees vary. While Altacit Global sees Hyderabad as a lucrative market, others emphasize that fees in the city are lower than Mumbai and Delhi.
“You cannot simply walk into a client’s office and demand Delhi rates in this city,” says Krishna Grandhi, the founder of Grandhi Law Chambers. He adds that clients will baulk at paying even half of what is charged in Delhi, and says that local firms can afford to “hire local lawyers at local rates and offer localized services at local expectations”.
HARD GROUND TO HOLD
Yet clients routinely look to firms in Mumbai, New Delhi and Bengaluru when they require legal counsel.
Hyderabad is home to several pharmaceutical companies including Natco Pharma, where M Adinarayana, vice-president of legal and corporate affairs, says counsel outside Hyderabad are often engaged, given that litigation cases on intellectual property rights matters are typically heard in the high courts of larger cities.
He says law firms in Mumbai and New Delhi will find opening an office in Hyderabad financially unviable “as cases that emanate in Hyderabad are very small in nature and non-productive”.
Ramky Group is a Hyderabad-based entity that includes an infrastructure development company. Its executive director, M Goutham Reddy, says lawyers from outside the city are engaged for services related to corporate law. He says there is an “urgent need and demand” in Hyderabad for expertise that is typically associated with India’s national law firms.
Devakumar Ramamoorthy, head of legal at Verizon India, offers a different perspective. He says companies in Hyderabad belonging to some major sectors don’t have much of a general counsel culture.
“The legal function comes under finance and as a result, chartered accountants rule the space,” says Ramamoorthy, who points out that companies in Chennai were no different until some years ago. “For instance, if you do an M&A, you would go to a chartered accountant to discuss tax and finance [issues] before seeking out a legal adviser.”
Be that as it may, law firms that have established themselves in Hyderabad agree that finding local expertise is vital.
“You need someone who is from Hyderabad but has worked in a Mumbai or Delhi firm and understands the needs of clients,” says Shireen Sethna Baria, the founder and managing partner of Hyderabad-based Vakils Associated, which has 18 lawyers.
Baria moved to Hyderabad 20 years ago after working in Delhi and says “unless you have a local presence and understanding of how things work”, it is difficult to shrug off the notion that “nothing great is going on in Hyderabad”.
Grandhi echoes these sentiments when he says that the trust factor is vital. “Clients here are very comfortable giving work to smaller law firms or practitioners whom they can relate to,” he says, adding that winning a client’s trust is vital. “It’s not about the brand, the school, or the credentials … it’s simply about how well they like you and how much they trust you.”
National law firms that operate as one firm across all their offices may struggle to provide for such clients.