Related Party Transaction

A Related Party Transaction (RPT) is any transaction between a company and a related party — including sales of goods, provision of services, loans, guarantees, leases, property transfers, or any other financial arrangement — where the terms may potentially differ from what would be agreed in a purely arm's length market transaction between unrelated parties. RPTs are not inherently improper — many are legitimate operational necessities (such as inter-company loans within a conglomerate group, shared service arrangements, or procurement from group companies). However, they create a significant risk of minority shareholder exploitation when controlling shareholders use RPTs to transfer value away from the listed entity — through artificially high prices paid for purchases from related parties, below-market prices for assets sold to related parties, or loans provided to related parties without adequate interest or security. In India, SEBI's LODR Regulations require disclosure of all RPTs in quarterly and annual filings, audit committee pre-approval for transactions above ₹1 crore, and shareholder approval through special resolution for material RPTs (exceeding 10% of annual consolidated turnover). High-profile RPT controversies — including several Indian promoter-led companies transferring cash, real estate, or business opportunities to promoter-owned private entities — have made RPT analysis a critical component of minority investor due diligence and ESG governance assessment in India's equity markets.