MUMBAI, May 12 -- Investors are beginning to finance commercial lawsuits in India in exchange for a share of future settlements or court awards, as litigation funding- a niche alternative asset class long established in some global markets-starts to take shape locally.

At least three entities, including alternative investment fund (AIF) Five Rivers, New Delhi-based LegalPay, a litigation funder, and Singapore-based ELF Partners, a litigation finance consultancy, are active in the space, marking early institutional entry into what is also known as third-party funding (TPF).

Five Rivers, a Mumbai-based AIF, is in talks with investors to close its first fund of $25-50 million, according to Irfan Mughal, the managing director of Five Rivers...