Article: Corporate India’s legal costs increase 17.5% in 2013-14

We don’t normally report from India as we imagine that Legally tends to cover most things.

That said we find this very interesting and we imagine an opportunity for some out there..

Here’s the link and piece


MUMBAI: An overhead cost is steadily expanding for Indian companies as they aggressively push in overseas markets and regulations become tougher at home and abroad. More than 1,800 listed companies that the ET Intelligence Group has analysed have collectively spent about Rs 21,906 crore during the fiscal year through March 2014 on legal matters, a 17.5% jump over the previous year.

“We have noticed a significant increase on account of legal fines and penalties imposed by authorities, both foreign and Indian, and an increase in foreign legal expenditure,” said Vishwang Desai, managing partner of law firm Desai & Diwanji. “There is no real planning that companies can do to get away from necessary legal expenditures. All they can do is to appoint less expensive lawyers and stay away from doubtful corporate actions.”




The top five sectors in terms of legal spending in the past year were pharmaceutical, information technology, oil and gas, capital goods and financial services. Companies in some of these sectors have been aggressively expanding in overseas markets, which require them to meet regulations in those markets. Some of them also faced legal problems aboard.

“We are witnessing so many new rules and regulations, especially in pharmaceuticals and also in other sectors which is the primary reason for legal-cost escalation,” said the head of a Mumbaibased pharmaceutical firm who didn’t wish to be named. “Many companies are training their legal staff to do certain work and negotiating hard with law firms to bring down the cost. Also, companies are asking firms to quote on project bases rather than hourly bases.” The legal costs also indicate higher spending on merger and acquisitions, joint ventures and greenfield expansion, which he said is positive.

According to the analysis, Reliance Industries continued to be the largest legal spender, with its expenses increasing 35% from a year earlier to Rs 1,184 crore. The company, India’s largest private sector firm by revenues, has taken huge bets on the US shale gas business and is in the process of re-entering the telecom business through a slew of partnerships in a sector that’s still a legal maze.

Ranbaxy Laboratories was the second highest spender on legal matters, with its cost more than doubling to Rs 844.54 crore. The US Department of Justice had imposed a hefty penalty on the drug maker, one of the reasons that drove up the cost. In recent years, Indian pharma companies have been increasingly challenging patents of global drug majors in highly regulated markets such as North America and Europe. Such activities often lead to lawsuits.

Other companies with large legal expenses last fiscal year included Tata Consultancy Services (Rs 613 crore), Larsen & Turbo (Rs 526 crore) and Infosys (Rs 504 crore).

Six telecom services companies have spent a combine Rs 504 crore on legal matters, which is 26% higher than the previous year. The expenses were towards litigations, contractual works, acquisitions and government penalties.

“Companies are spending large amounts on compliance related issues with regard to competition law, transfer pricing, and FCPA (Foreign Corrupt Practices Act of the US) and UK’s anti-bribery laws, amongst others,” said Anand Desai, managing partner of law firm DSK Legal. “Many companies are asking firms to reduce fees for more standardised services, and are taking preventive measures with planned costs. Unplanned expenses for litigation, penalties and fines can result in large financial outlays for companies,” he said.