Largest Indian IPO ever: Conversation with Madhurima Mukherjee, Head of Capital Markets at Luthra & Luthra

The Coal India IPO, which was oversubscribed by 15 times at the upper band of Rs. 245, ended with a 43 percent gain at Rs. 349 a share on the BSE when listed. The IPO that opened on October 18, 2010 mobilized Rs. 236,000 crore (US$52.4 billion), although the target was to raise only Rs. 15,500 crore (US$3.4 billion). Certain media reports indicate that the amount of money that was mobilized in this IPO in a span of four days was more than last year’s GDP of about 140 countries. .Coal India’s IPO is the largest offering in Indian capital markets history, surpassing Reliance Power’s Rs. 13,500 crore (US$3 billion) listing in 2008..Your firm acted as the advisor on the Coal India IPO and the IPO remains one of the biggest and most talked about transactions of the financial year. Talk us through the process on advising on this landmark IPO..Madhurima: Yes, that is right, the Coal India IPO was the largest IPO ever in the Indian market till date. It was also the second largest public offering in the world in 2010..We were very clear that we wanted to advise the Government on this transaction. There are few transactions in your career which (I believe) alters your perspective to transactional work forever. Coal India was one such transaction. We had mentally prepared ourselves for the task at hand. What we did not realise is that whatever we had imagined had to be multiplied by fifty and we would still fall short by about another hundred percent on what we ended up doing. It built character!.Coal India has a thirty year old history and many legacy issues. It is one of India’s largest public sector undertakings. It had eight subsidiaries with huge operations. It has complex issues ranging from mining, to employment, to multiple litigations in an environmentally sensitive sector. Estimating adequate staffing was the first step. We had a fifteen member team between our Mumbai and Delhi offices led by Manan and me. We divided our work location wise and entity wise. There was no question of going back to these locations some of which were in remote parts of the country. Manan and I had to work very closely together. The hardest task was to make people at every level in the company understand the enormity of the task at hand. But once we had the top management convinced, they and the Department of Disinvestment were extremely supportive. We had to monitor work on a daily basis, coordinating with the banks, reporting to the Department of Disinvestment, just spending the physical time to wade through the information to find what is relevant. It needed machine-like precision to achieve the near-impossible timeline set for us..Our team views their careers as ‘life before Coal India’ and ‘life after Coal India’. We have all grown manifold with this transaction..What according to you are the nuances of a Government IPO?.Madhurima: You cannot categorise all PSU public offers in the same slot. I have mostly worked with public sector companies which are very large. Therefore, my personal experience is limited to such extent. I would split the nuances into issues of law and that of handling the transaction. Large public sector companies usually have legacy issues due to nationalisation, the assets they hold and purpose of their incorporation. They are often in sensitive sectors. Sometimes they are in a monopoly position due to Government protection in pricing etc. All this needs to be examined and explained in disclosure documents. These companies are behemoths and have long operational histories. This throws up challenges in due diligence and document management and sensitive issues which require attention. In disinvestments, we cannot only think commercially. We need to take the policy of the Government and the macro agenda into consideration when we offer legal solutions to issues..The Department of Disinvestment is extremely supportive because they have certain internal targets and policy milestones to achieve; however the timelines given are aggressive. We sometimes work on a war footing to achieve the timelines..Your thoughts on the ever-changing capital markets trends in India..Madhurima: As far as the capital markets trends are concerned, it’s hard to tell. The word on the street is that things are going to slow down in the short run, but we are at our busiest. People want to be ready to launch when the markets look better. This is good news for the lawyers, I guess. We take a slowdown as a welcome break to train our people and regroup..If India is growing at 8-9%, how can the capital markets be left behind. People with robust businesses need money. So we may see a surge of more innovative structures and instruments. Banks are innovating and as I said, hopefully, we will be there to help them..What is Luthra’s strategy with respect to its capital markets team? Any specific targets for the coming year?.Madhurima: The strategy is to continue concentrating on quality rather than quantity. We do not want to do every deal on the street. We want to work on the best deals if we can, with the best banks. In order to meet this aspiration, we want to produce quality documentation and give adequate attention to detail. Indian firms often compromise on the quality of documentation because either they do not concentrate on developing their human resources or they just take on more than they can service. That is not our model. While no one can get away from pricing pressures, we do not want our practice to be driven by that. We believe that compromises quality of legal work at some level. Banks are slowly realising that with the volume of SEBI investigations and follow ups, cutting corners on legal costs will not help. We want to work with the banks to help them better understand liability issues and improve on the general level of due diligence and documentation..Our target is to do every kind of work, from private transactions to disinvestments. Hopefully we will get asked on the more innovative and exciting deals.