In FY15 32 listed companies pay Rs 6,300 cr royalty

As many as 32 multinational companies listed on BSE paid royalties worth Rs 6,300 crore to their global parents in the last financial year, says a report.

Proxy advisory firm IiAS today said the payout amount translates to around 21% of the 32 companies' pre-royalty pre-tax profits.

Its study of 32 MNCs in the BSE 500 index showed that they 'paid royalty aggregating Rs 63 billion," in FY15.

"Multinational companies based in India pay royalty because they use brands/technology know-how that have been developed outside India by their global parents and are a result of extensive product research and knowledge," IiAS said.

While royalty is a legitimate payout, it noted that such payments must be linked to performance.

However, royalty and related payments for these companies increased at twice the rate of the growth in their pre-royalty pre-tax profits over the past five years, the report said.

"Over the past five years, aggregate royalty and related payments for these MNCs increased at a five-year CAGR (Compounded Annual Growth Rate) of 20% compared to a mere 7% growth in their pre-royalty pre-tax profits," as per the study.

According to IiAS, the steady increase in royalty payouts can be largely attributed to a change in regulations in December 2009 which liberalised the payment of foreign technology collaborations and royalty fees under the automatic route, including lump sum payments for transfer of technology, payments for the use of trademark and brand name.