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Litigation Costs Surge in India: A 17% Jump in FY24

Indian corporations witnessed a significant rise in legal expenses during the financial year ending March 2024 (FY24), with a 17% surge compared to the previous year. The Economic Times reports that the primary drivers behind this increase are heightened global deal activity, escalating dispute resolution costs, and rising compliance expenses.

• Nifty 500 companies collectively spent INR 52,568 crore ($6.26 billion) on legal expenses in FY24, a substantial increase from the INR 44,920 crore spent in FY23. This data is sourced from ET Intelligence Group (ETIG).
• The top 50 companies by market capitalization contributed significantly to this surge, experiencing a 17.4% rise in their legal costs, reaching INR 21,389 crore.

Key Drivers of Rising Litigation Costs

Several factors are contributing to the escalating legal expenses for Indian corporations. These include:

• Domestic and International Expansion: As businesses expand their operations both within India and globally, they encounter new legal complexities and regulatory requirements, leading to increased litigation and legal expenses.
• Higher Regulatory Fees: The Indian government has implemented various regulatory changes and increased compliance requirements, resulting in higher fees for companies to adhere to these regulations.
• Substantial Costs of Litigation and Arbitration: Companies are increasingly involved in complex disputes and legal battles, both domestically and internationally, driving up the costs associated with litigation and arbitration.

Expert Insights on Rising Litigation Costs

Nishith Dhruva, managing partner of law firm MDP & Legal, highlights the significant increase in the cost of non-compliance as a key factor driving companies to prioritize compliance and regulatory spending. He states: "The cost of non-compliance has gone up significantly and hence most companies are trying to spend on compliance and other regulatory, which generally goes in the bucket of 'legal spend' for several listed companies. It's a sign of a maturing market and one may see this cost going up continuously."

Breakdown of Legal Expenses: Categories and Top Spenders

Legal expenditures encompass a wide range of costs, including:

• Litigation
• Arbitration
• Professional Services
• Regulatory Filings
• Fines
• Stamp Duties

In FY24, the top corporate spenders on legal expenses were:

Rank	Company	Legal Expenditure (INR Crore)
1	Reliance Industries	3,286
2	Sun Pharmaceutical Industries	2,953
3	Infosys	1,726
4	Larsen & Toubro	1,550
5	Samvardhana Motherson International	1,287

Sector-Wise Legal Expenditure

The report further reveals the top spending sectors in terms of legal expenses in FY24:

Rank	Sector	Legal Expenditure (INR Crore)
1	Infotech	9,901
2	Pharmaceuticals	9,496
3	Finance	5,110
4	Capital Goods	4,321
5	Oil & Gas	4,065

The rising trend of legal expenses in India reflects the increasing complexity of business operations and the growing importance of compliance and dispute resolution in a maturing market.