Indian law firms are reaping the benefits of both a capital market in rebound and a national government that is looking to use calmer economic conditions to partially privatise a number of its assets.

In what is set to the second- largest of such deals so far, Oil India, the country’s second largest oil and gas producer is seeking to raise between US$520m to US$574m in a mid-September IPO.

Through the offering the state-owned company will sell 11 percent of its enlarged share capital and a further 10 percent at the IPO to three state-operated refiners: Indian Oil Corporation, Hindustan Petroleum and Bharat Petroleum Corporation. These two transactions will reduce the government’s stake in Oil India to 78.4 percent. (It previously held as much as a 98.1 percent interest in the company).

Amarchand & Mangaldas, India’s second-largest firm by headcount, was tapped by Oil India for local law advice while Luthra & Luthra were retained by the joint bookrunners — Citi, HSBC and JM Financial/Morgan Stanley — for advice on Indian law.  UK-based firm Ashurst was international counsel for the transaction providing advice on UK, US and NY state law.

The first government-owned company to take the part-privatisation IPO path was hydro power company NHPC who raised US$1.25bn in an IPO that was nearly 23 times oversubscribed earlier this month. On this particular deal, Amarchand & Mangaldas was again called on to provide Indian law advice while US-based firm Dorsey & Whitney was international counsel to the transaction.

But both deals are only the tip of the iceberg, according to a number of market analysts, who say that the recent activity on the capital market in India could prove the catalyst for at least five or six similar transactions before the end of 2009. These two offerings increase the total amount raised by Indian IPOs this year to US$1.9bn. It’s worth noting that in 2008 this figure was US$4.3bn and US$8.1bn in 2007.