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 costs 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, co-founder 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 ₹2,023 crore, Reliance Industries (₹1,486 crore), Infosys (₹1,261 crore), Larsen & Toubro (₹912 crore), and Fortis Healthcare (₹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 ₹1,22,94,576 crore, up 16% from ₹1,05,75,601 crore the year before. Their total expenditure, too, rose over 15% to ₹99,92,254 crore in FY22 from ₹86,30,039 crore in the previous year.
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