The managing partner of Cyril Amarchand Mangaldas, in an exclusive conversation with India Business Law Journal, says innovation in the insolvency space, such as pre-packs, NCLT reforms and bad bank, will fuel deal activity
Q: What was the impact of the pandemic on your firm and what is your strategy for 2021?
A: You know, our experience like that of many firms, both in India as well as globally, has been there for the legal services industry, the pandemic hasn’t been that bad. People have been extremely busy. There are several pockets in the firm who are busier than they ever were before the pandemic. So it’s kind of ironic because in March and April, had you asked me the question, I mean, we were all staring at a doomsday scenario, but that never happened. And the reason I think is that the financial markets never closed. So it was essentially a healthcare problem, and as far as the financial sector remained largely open the need for legal services went up quite a bit, because everybody needed help.
And I think, we are now seeing a recovery. So even the prediction as far as India is concerned, of course we had the economic contraction in the last financial year, is that in the next [financial] year we’re looking at an 11% expansion. So that’s a good sign.
I’m expecting 2021 to be exceptionally busy. And we have a very positive and confident outlook. I think there’s going to be a tremendous amount of M&A. There already is, and I think there will be even more, capital markets work in terms of new issuances. And because of people coming out of the pandemic crisis, I think there’ll be a lot of disputes as well, which will need to be resolved.
Q: With the moratorium on the insolvency code coming to an end, what is your outlook for insolvency resolution cases?
A: So the moratorium will formally comes to an end at the end of March. And after that, once normal Insolvency and Bankruptcy Code (IBC) and restructuring work start we’ll see a large number of cases because there are a lot of zombie companies who are actually insolvent, but are not recognized as such. So, that dam will burst.
But there’s also a lot of innovation taking place in the IBC space. For example, India is about to introduce a new pre-pack [insolvency] regime. So, pre-packs might become a way of resolving anticipated insolvencies. Also, the finance minister in the budget announced reforms to the NCLT process. They’re trying to convert a part of it into e-courts or e-NCLTs, which will speed up matters.
So, lots of cases will come post-April. There will be new ways of resolving them. And I think that is partly going to be the fuel for the M&A activity. You also would have read about the new bad bank that has been announced, it’s called the ARC [asset reconstruction company], but it’s basically a bad bank. So that will also help in smoothing and speeding up transactions.
Q: What is the outlook for other practice areas such as private equity, M&A and dispute resolution?
A: I think private equity investment is going to be driving a lot of M&A and investment activity. And we saw that even in 2020. I think that trend is going to get only stronger and I feel that there will be even more control deals. So they won’t be just minority investments.
I would not rule out outbound [M&A], but there would be fewer. It [deal activity] would be in two parts. One, inbound [deals] driven both by financial sponsors and distressed assets funds, as well as some strategics, but also a lot of domestic-to-domestic deals. There’s a lot of domestic consolidation that I think is possible.
I’m just waiting for a bit more of a revival on the disputes front when the courts properly reopen. So that is a bit patchy. They’re [courts] now currently focusing mostly on urgent matters. Litigators are not that happy just now. I mean, this is true for everybody, not just our firm. But once that comes back to some kind of normalcy, there’ll probably be a rebound of activity there.