Unveiling the Surge: Royalty Payments by Companies Double Over Decade

A Sebi study finds that royalty payments by listed companies to related parties more than doubled over a decade, reaching Rs 10,779 crore in FY23 from Rs 4,955 crore in FY14. Concerns over disclosure practices and the impact on shareholder dividends are highlighted.

In a significant revelation, a recent study by the Securities and Exchange Board of India (Sebi) disclosed that royalty payments made by listed companies to related parties have more than doubled in the past decade. The payments surged from Rs 4,955 crore in FY14 to a staggering Rs 10,779 crore in FY23.

The study highlights that in one out of four cases, companies paid royalty amounts to related parties that exceeded 20% of their net profits. Additionally, one in two companies either did not distribute dividends or paid higher royalties than dividends to non-related party shareholders.

Sebi's investigation also pointed out insufficient transparency among companies regarding the rationale and rates of royalty payments. This lack of disclosure raises concerns, especially for shareholders of multinational companies, who are often in the dark regarding royalty charges between subsidiaries across different regions.

(With inputs from agencies.)