With the Prime Minister’s Office recently holding a brainstorming session on how to scale up Indian accounting, audit and advisory firms to compete with global giants, Rakesh Nangia, Managing Partner at Nangia & Co, in an interview to BT says it is the need of the hour and will help Indian firms evolve and mature. Edited excerpts:
The government and ICAI have been working on plans to scale up home-grown accounting, audit and advisory firms. Do Indian firms have the capacity to compete with global accounting firms and the Big Four firms?
It is not a question of whether we have the capacity or not. This is the need of the hour. The thinking in the government is that India needs to be self-reliant and not reliant on any other country, whether it is in manufacturing or services. That is the genesis of Atmanirbhar Bharat. We have already achieved self-reliance in several sectors. Our IT sector is a case in point, where over the last two decades, we have become amongst the largest globally. India has also achieved self-reliance in sectors like defence, space and nuclear, which were slowly opened up from earlier being totally dependent on global companies. Even in semiconductors, India is making huge strides. I will give you a classic example from my profession. The government opened the BFSI space to the non-Big Four companies. All good decent sized CA companies saw a jump in their practice. The government didn’t do much but only liberalised some provisions. It is a slow, gradual process, people and businesses have to get used to it. There should be no disruption to the economy. The government is giving a message that we will continue to open up.
Q. What kind of measures are needed to further build the capacity and scale of Indian firms?
It is about opening up the economy. The government has been very clear about moving in this direction for ease of doing business without causing any disruptions. This also holds true for CA firms and helps them grow. We are not comparing ourselves to the Big Four firms, that have been around for over 100 years, and have huge amounts of capital, network and talent. But when the government opens up provisions in gradual phases, it helps make our domestic CA firms more self-sufficient and independent without any disruption. I will give a few examples. For instance, why can’t we have joint audits for more companies? Apart from the Big Four, there will be another 50 to 100 mid-sized domestic CA firms that will start competing. They will get a level playing field. They have competent teams in place, and they will be able to meet the demand. There is a clear gap in the market in several services that these companies can fill. In the BFSI space, mid-size CA firms are doing well whether it is bank audits or insurance companies. All these companies got very good opportunities to render services, and they are doing well. The government can consider opening up the sector gradually, in a phased manner and eventually after two to three years, it can open up the sector completely. The satisfaction level of clients is very high.
Amendments to the Companies Act are looking at more provisions such as joint audits….
Yes, one of the provisions is that joint audit should not be limited to a few firms and should be opened up. I won’t be surprised if they follow the BFSI model and open it up. My firm is a classical example in the BFSI sector. The satisfaction level of clients is very high, despite earlier concerns that there will not be good services or there will not be professional enough. Indian CA firms have the knowledge and the expertise to service clients in the sector.
Indian audit and advisory firms are typically family-owned and are generally proud of their heritage and lineage. Will they be willing to merge and go big?
It is about gaining maturity, and I think that is happening now. There is some hesitancy, but when the door opens, it can lead to huge opportunities. The nature of business is changing today, and Indian CA firms need to evolve as well.
What are your own focus areas in terms of expansion and capacity building?
Nangia & Co LLP was established in 1984 and has expertise across taxation, audit and assurance, mergers and acquisitions, valuations, corporate financial advisory, GST, cybersecurity, sustainability, forensics, and government advisory, healthcare, IT advisory among other service domains. We are a reasonably aggressive firm. Challenges are always there for a smaller Indian firm in terms of capitalisation and talent. We have got good talent. We have some cultural ethos—speed in decision-making, faster turnaround and more agility. I am creating my own space in the profession.
