Proxy advisories have expressed concerns about royalty payments to related parties, as highlighted in a recent study conducted by the Securities and Exchange Board of India (SEBI).

The study, which examined 233 listed companies across various sectors over a ten-year period from FY14 to FY23, found that companies paying royalties did not outperform those that did not. The study also revealed that royalty payments, which are typically made for technology transfers or the use of trademarks, had little correlation with profits or revenues over the years.

Notably, in 25% of cases, listed companies paid royalties that exceeded 20% of their net profit. This raises questions about the transparency and effectiveness of such financial arrangements within corporate structures in India.