Related-party transactions and the 2025 thresholds

A related-party transaction (RPT) is any deal between a company and someone close to it: promoters, directors, key managers, their relatives, and the entities they control. Examples include buying raw materials from a promoter-owned supplier, paying a brand royalty to the promoter's holding company, renting an office from a director, or lending money to a group company.

RPTs matter because they are the easiest way to move value from minority shareholders to promoters. A company can look profitable and still leak cash through rent, royalty, loans or purchases at unfair prices. In India, where most listed companies sit inside promoter groups, RPT analysis is one of the most important parts of any governance review.

Most RPTs are ordinary and harmless. The analyst's job is to find the few that are not.

Three sets of rules

• Ind AS 24: what must be disclosed in the financial statements
• Section 188, Companies Act 2013: board and shareholder approval for certain deals
• Regulation 23, SEBI LODR: approval and disclosure rules for listed companies

The definition is wide

Under LODR, related parties include the promoter and promoter group whatever their holding, and, since April 2023, any person or entity holding 10% or more of the listed company. Transactions with subsidiaries, and deals that benefit a related party indirectly, are also covered.

Approval layers

The 2025 materiality thresholds

SEBI notified the LODR (Fifth Amendment) Regulations on 18 November 2025. Under the old rule, an RPT was material if it exceeded ₹1,000 crore or 10% of annual consolidated turnover, whichever was lower. The new test scales with company size:

So a company with ₹30,000 crore of turnover has a threshold of ₹2,500 crore, and one with ₹1,50,000 crore is capped at ₹5,000 crore. Brand usage and royalty payments still use the old test of 5% of annual consolidated turnover.

For deals by subsidiaries where the listed company is not a party, an RPT above ₹1 crore needs the parent's audit committee approval if it exceeds 10% of the subsidiary's standalone turnover or the parent's own materiality threshold, whichever is lower.

The higher thresholds mean fewer deals now go to a shareholder vote. That makes reading the disclosures yourself more important, not less.

Sources of RPT information

• Notes to accounts: the "Related party disclosures" note lists each party, the relationship, transactions during the year and balances at year-end
• Board's report: Form AOC-2 for material contracts or those not at arm's length
• Corporate governance report: the RPT policy and the audit committee's role
• AGM and postal ballot notices: material RPT resolutions and voting results
• Half-yearly RPT filings with the stock exchanges

A five-step method

1. Map the parties. Sort them into subsidiaries, associates, promoter-owned entities and key managers. Promoter-owned private companies deserve the most attention, because minority shareholders own nothing in them.
2. Group by type. Sales, purchases, royalty or brand fees, rent, loans given, loans taken, guarantees and pay.
3. Size it. Calculate RPTs with promoter entities as a percentage of revenue and of EBITDA (see the RPT Intensity formula).
4. Compare years. If RPTs grow faster than revenue, find out why.
5. Check closing balances. Look at receivables and loans due from related parties at year-end, and compare them with net worth.