Royalty payments by some listed companies exceed 20% of profits
Listed companies paid royalty to related parties in excess of 20% of their net profits on one out of four occasions, flagging the need for change in norms, a study published by the Securities and Exchange Board of India (Sebi) Thursday showed.
“The data suggests that though the royalty payments made by companies are reasonably within the stipulated threshold, such payments are unjustifiably high in terms of their profitability,” Sebi said.
“While the necessity of royalty payment to be considered as an expenditure from the perspective of business growth is acknowledged, such payments when viewed through the profitability lens reveal too pressing an issue to be overlooked,” it said.
In one out of two occasions that listed companies paid such levels of royalty, they did not pay dividends, or paid more royalty to related parties than dividend paid to other shareholders.
The study asked whether companies that skip dividend payments but pay royalty be subject to enhanced scrutiny from shareholders.
The regulator said there were 185 instances of royalty payments by 63 companies that made net losses. In such instances, these companies made royalty payments of Rs 1,355 crore to related parties during FY14-FY23.
Stock Trading
Point & Figure Chart Mastery: A Comprehensive Trading Guide
By — Mukta Dhamankar, Full Time Trader, 15 Years Experience, Instructor
Stock Trading
Stock Valuation Made Easy
By — Rounak Gouti, Investment commentary writer, Experience in equity research
Stock Trading
Commodity Markets Made Easy: Commodity
