India Inc spent less on legal fee last year amid Covid curbs, poor appetite for deals

Legal expenses of India Inc declined in the last fiscal as per the annual reports of 4,170 companies listed on Indian bourses.

These companies spend a total of Rs 43,667 crore in legal expenses for the year ended March 2022, down 5.20% from Rs 46,059.98 crore in the previous year, data compiled by ETIG show.

Legal expenses include spending on litigation and arbitration, professional fees, regulatory filings, penalties, and general stamp duty.


Pandemic-induced lockdowns, restrictions on travel and gatherings that led to virtual hearings of court cases, and a weaker appetite for deals amid uncertain times are some of the reasons being cited for this reduction in legal cost in FY22 when total cost, too, had come down for India Inc.

“The drop in legal expenses was due to the ravaging Delta wave of coronavirus, especially in relation to litigation and is not reflective of any general trend of decline,” said Bahram N Vakil, cofounder at corporate law firm AZB & Partners. “These figures are likely to go up during 2022-23 since all activities including transactions, fundraising and dispute resolutions such as litigation and arbitrations have regained pace,” he said.

Another reason could be increased cost consciousness amid rising inflation and margin pressure, experts said.

“I believe that cost consciousness has increased among corporates, which is going to continue,” said Anand Desai, managing partner of law firm DSK Legal. “There are large in-house legal teams that take care of larger volumes of work, and more complex work as well. The role and responsibility of general counsel in corporates have increased tremendously, and I believe in-house teams will keep growing and building more and more relevant expertise,” he added.

Top five spenders in terms of legal costs in FY22 were Sun Pharmaceutical Industries at Rs 2,023 crore, Reliance Industries (Rs 1,486 crore), Infosys (Rs 1,261 crore), Larsen & Toubro (Rs 912 crore), and Fortis Healthcare (Rs 883 crore).

Total legal spending of all the listed companies on Indian bourses may sound big, but it is minuscule at just 0.36% of their total revenue and 0.44% of their total expenditure.

As per data compiled by ETIG, research and analysis division of ET, the revenue of all listed companies in FY22 totalled Rs 1,22,94,576 crore, up 16% from Rs 1,05,75,601 crore the year before. Their total expenditure, too, rose over 15% to Rs 99,92,254 crore in FY22 from Rs 86,30,039 crore in the previous year.

Rajiv Choubey, group general counsel at Dalmia Bharat Group, said all leading companies and business houses are looking for building a robust legal function that can advise the management on the entire gamut of business activities.

“Considering the risks associated with businesses, a strong in-house legal team that can partner with the business and navigate the management is a must,” he said. “India is going to grow at a decent growth rate of 6-8% in coming years. A growing economy indicates an increase in economic activities and M&A opportunities and, hence, in my considered opinion, the legal spending by the companies will witness an overall increase,” Choubey added.