SEBI Report Reveals Companies Paying Over 20% of Profits as Royalties

The Securities and Exchange Board of India (SEBI) recently conducted a study of 233 listed companies from 2014 to FY23.

The study found that many companies paid over 20% of their net profit as royalties to related parties; sometimes royalties were paid even during losses or without paying dividends. In some cases, royalty payments exceeded 20% of net profits. The study, which identified 1,538 instances of royalty payments, revealed that 1,353 occurred during profitable years, while 185 were during losses. SEBI plans to introduce stricter regulations, including cumulative royalty limits and sunset provisions, to address public shareholder concerns about excessive royalty payments to related parties.