MUMBAI, Jun 27 (Xinhua) -- India's capital market regulator raised the threshold limit for royalty and brand usage payment to 5 percent of annual income from the earlier 2 percent, Thursday.
"Payments made to related parties towards brand usage may be considered material if the transactions exceed 5 percent of the annual consolidated turnover of the listed entity during a financial year," said the release by the regulator - Securities and Exchange Board of India after the board meeting.
If the royalty payment exceeds the 5 percent threshold, the company would require shareholder's approval through voting without interested parties having a vote in such resolutions.
Among the Indian subsidiaries of large global multi-national companies in the consumer products industry, Colgate Palmolive (India) and Proctor & Gamble (P&G) are paying the highest royalties of 4.9 percent of sales to their global parents.
Nestle India pays around 4.4 percent, GSK Consumer Healthcare about 3 percent and Hindustan Unilever Ltd (HUL) around 1.8 percent, according to equity analysts.
In the automobile space, Maruti Suzuki India makes the highest royalty payment of 4.7 percent.
According to experts, the prevailing threshold limit prior to today's revision of 2 percent for royalty payment discouraged multinational companies from sharing the latest technology with their listed Indian subsidiaries.
In 2017-18, royalty paid to the foreign parent company or non-residents rose to 3.9 billion US dollars from 3.3 billion US dollars in the previous year, as per government data.
