Domestic law firms, reeling under heavy workload due to a large number of DRHP filings in recent months, are increasingly asking issuers to also hire an international firm for smaller deals not marketed to US-based institutional investors, sources have told Moneycontrol.
Since the beginning of 2025, more than 60 draft documents have been filed with the Securities and Exchange Board of India (SEBI), highlighting the frenetic activity in the Indian primary market even as IPO launches have stalled in the past few weeks due to US tariffs and market volatility.
Every IPO has at least two law firms — one represents the company and the second the merchant bankers. However, several initial public offerings (IPOs) also need a third law firm. The number of law firms depends on whether the shares are expected to be sold to US-based investors.
According to US Securities Exchange Commission norms, any security not registered with the SEC can be marketed to American investors under section 144a. Public offers looking to tap 144a need to have an international law firm that advises the issuer and merchant bankers on US securities laws.
For IPOs that don't intend to tap US-based investors, there is a separate SEC rule — Regulation S or RegS.
These IPOs typically use only two domestic law firms. The issue size is also smaller, and so is the participation of foreign institutional investors.
Burdened with paperwork, some domestic law firms have started pushing issuers to bring on board an international law firm even for RegS non-US IPOs.
Some lawyers said they have stopped taking deals that involve only two law firms.
“We, as a firm, are not taking up two counsel deals — where only two Indian counsel are proposed to be appointed — due to bandwidth and based on our own lawyers’ feedback,” said a senior capital markets lawyer with a Mumbai-based law firm. The lawyer spoke on condition of anonymity.
Other lawyers added that given the increasing number of companies looking to tap the primary market, such small deals with only two law firms are choking the bandwidth while not offering much in terms of fee income.
“In these deals, where you don't have the third law firm, which is an international firm, the company counsel usually charges a higher fee for taking on the additional work that would have been done by the international law firm.
“However, compared to a three-law firm deal where you would deploy a team of four lawyers, in these two-firm deals, you may end up using double the number of lawyers, which reduces your ability to take on more IPO mandates,” said another senior capital markets lawyer based in Mumbai.
More IPO business for international law firms
With India emerging as the top IPO market in 2024 by deal volume, with a cumulative fundraise of around $20 billion, the market has become a significant revenue contributor for international law firms.
With domestic law firms pushing companies to add international legal counsels for even smaller deals, international law firms are set to gain more business.
However, bringing international law firms for smaller deals may increase legal fees for the issuers, as these companies can charge anywhere between $300,000 and $500,000 a deal, said capital market lawyers.
“Unlike merchant bankers who get paid most of their fee on the successful completion of the IPO and listing of shares, most of the legal fees are paid upfront or at the time of DRHP filing. So, issuers will have to fork out more fees if they must hire a third law firm on their deals,” said a third capital markets lawyer, also on the condition of anonymity.
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