FoxMandal Little and French international firm Gide Loyrette Nouel won the government’s mandate to take Manganese Ore (India) Ltd (MOIL) to its initial public offering (IPO) by putting in the lowest bid-price yet compared to disinvestments.
The FoxMandal team was led by Delhi senior partner Ajit Yadav and partner Sumes Dewan.
“The market is really picking up and in fact we have a couple of disinvestments coming up,” said Dewan, who joined FoxMandal earlier this year from KR Chawla & Co. “We handled one at the beginning of the year with SJVN – one of the first disinvestments - that started in December.”
“It seems like it is on the right track, now that the government is proposing to get a couple of more IPOs and disinvestments.”
Dewan confirmed that the two law firms together quoted a flat fee of Rs 1.05 crore for advising on MOIL’s disinvestment.
FoxMandal’s fee quote is understood to have made up between Rs 25 and 30 lakh of that total, although Dewan declined to confirm the figure.
A disinvestment ministry source who declined to be named told Legally India that the tender for MOIL had taken place along the same basis as Engineers India Limited and Coal India Limited, where a number of law firms that had advised on the largest number of capital markets deals in the previous quarter were invited to tender.
Amarchand Mangaldas, Dua Associates, FoxMandal, Khaitan & Co and Luthra & Luthra all gave presentations to the department of disinvestment on 2 August 2010.
Dewan said that quality scores awarded to FoxMandal and Gide after their joint presentation meant that the firms’ financial bids were opened, which were lower than other shortlisted firms.
Amarchand last month won the Hindustan Copper disinvestment with a joint fee-quote with Dorsey & Whitney of around Rs 1.26 crore, while Luthra & Luthra and DLA Piper won the Engineers India IPO mandate with a total bid of around Rs 1.36 crore.
MOIL’s IPO is expected to raise around Rs 1,500 crore, according to Bloomberg, with bankers having pitched fee-quotes as low as Rs 150 to advise on the IPO.
A version of this article was first published by Bloomberg.
Comments
way to go Kian.
Kian, if LI has credible info' regarding the winning quote, by all means go ahead and let everyone know. That's part of your job!
See what US Treasury Deptt did with Goldman's quote: http://economictimes.indiatimes.com/news/international-business/Goldman-loses-out-in-GM-IPO-spoils-the-party-for-rivals/articleshow/6322692.cms
Even if its part of a law firm's strategy not to reveal what kind of money they're making on a deal, you cannot stop the client to disclose that information. If tomorrow you hire someone and decide to do a "tell-all", whats wrong in that?
As long as the figures are correct and have come from a verifiable source, there shouldn't be issues with publishing them.
I think however, some folks have taken a minor aspect of this article and have missed the bigger picture here. The fact that under-cutting firms are ruining the market for PSU offerings. If you look at any request for proposal, there is a technical qualifier followed by a financial bidding process. There is hardly any question as to the top contenders technically being Amarchand Mangaldas and Luthra and Luthra (considering technical qualification is primarily based on experience and infrastructure), however, the technical qualifications are as low as a minimum of one transaction of a minimum value (say Rs. X crore). Therefore, firms like Fox Mandal Little, which have completed only one such transaction qualify along with the bigwigs, and then it's just a matter of money, is it not?
This system is absolutely flawed, because the reason why smaller firms can charge this little is primarily because they don't have enough dedicated capital markets professionals (hence, manpower expenses lower. Know what else is lower? Quality, not because I'm suggesting they are any less intelligent than any other firm, but because capital markets practice IS labor intensive). What the system should be like is cumulative, meaning points being ascribed for technical qualification being added to point-based weightage for fees charged, and appointment of law firms with the highest score.
Another way of doing it would be to have a cap price on the fees, and have financial qualification first, i.e., the Department of Disinvestment setting a confidential maximum fees that they are willing to pay, and all bids below such amount qualifying, and thereafter, appointment of whoever has the highest points on technical qualification (which would be my ideal method).
The problem with the existing system is that it is absurdly unfair, in the sense that it can be likened to 3 students, A, B and C having to give a two-stage examination, for instance the I.A.S. examinations. In the preliminary examinations, A gets 90%, B gets 88% and C gets 51%, with 50 being the passing score. Thereafter, for the main examination, A and B get 70% each, while C gets 75%, and on such basis C is accepted, while A and B are not. The aggregate percentage for A, B and C would be 80%, 79% and 63% respectively, and would still win.
I think it's ridiculous that anyone, law firm or otherwise should be able to capitalize on their own, for lack of a better word, "cheapness", at least within the same economy, for the same CLIENTELE and under the same circumstances as its competitors.