Revised Framework on Related Party Transactions (RPTs)

A. PRESENT SCENARIO:

As per Regulation 23(2), (3) and (4) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015(“LODR Regulations”) read with Section 177 of the Companies Act, 2013, all Related Party Transactions (“RPTs^*”) are required to be approved by the Audit Committee and by the Shareholders, if material.

 Exemptions:

Approval of the Audit Committee / Shareholders is not required for the following transactions;

> transactions entered into between a holding company and its wholly owned subsidiary;

> transactions entered into between two wholly-owned subsidiaries of the listed holding company;

Meaning of Related Party Transaction:

Related party transaction means a transaction involving a transfer of resources, services or obligations between:

> a listed entity or any of its subsidiaries on one hand and a related party of the listed entity or any of its subsidiaries on the other hand; or

a listed entity or any of its subsidiaries on one hand, and any other person or entity on the other hand, the purpose and effect of which is to benefit a related party of the listed entity or any of its subsidiaries.

Exclusions:

The following shall not be a Related Party Transaction:

a. Issue of specified securities on a preferential basis;

b. Corporate actions which are uniformly applicable/offered to all shareholders such as

> dividend,

> subdivision or consolidation of securities,

> Rights issue or a bonus issue or buy-back of securities.

c. Retail purchases from any listed entity or its subsidiary by its directors or its employees, without establishing a business relationship and at the terms which are uniformly applicable/offered to all employees and directors.

Meaning of material Related Party Transaction:

A transaction with a related party shall be considered material, if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceeds rupees one thousand crore or ten per cent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity, whichever is lower.

Notwithstanding the above, a transaction involving payments made to a related party with respect to brand usage or royalty shall be considered material if the transaction(s) to be entered into individually or taken together with previous transactions during a financial year, exceed five percent of the annual consolidated turnover of the listed entity as per the last audited financial statements of the listed entity.

SEBI Master Circular dated November 11, 2024 (“Master Circular”) specify the information to be placed before the Audit Committee and Shareholders, respectively, for consideration on RPTs.

B. REVISED REGULATORY REGIME ON RPT DISCLOSURES BEFORE AUDIT COMMITTEE & SHAREHOLDERS:

In order to facilitate uniform approach and assist listed entities in complying with the above mentioned requirements SEBI vide its circular dated February 14, 2025 has formulated industry standards for minimum information to be provided for review of the audit committee and shareholders for approval of RPTs.

C. OBJECTIVE:

The objective of these Standards is to standardize the format for minimum information to be provided to the Audit Committee and Shareholders, whenever required for approval of RPTs.

As per circular, going forward the information as per standard format shall be incorporated in the agenda of the Audit Committee meeting.

D. APPLICABILITY:

These Standards shall be applicable in respect of RPTs entered into by the Listed Entity on or after 1^st April, 2025.

E. PROCESS FOR APPROVAL FOR RELATED PARTY TRANSACTIONS

(i) Identification of Type of RPT

(ii) Identification of RPT items

(iii) Type of Disclosure

(iv) Applicability of Disclosures based on transaction type:

Applicability Matrix

F. IMPORTANT NOTES:

The following points shall be considered while collecting and collating the information to be placed before the Audit Committee:

(a) Management to provide comments against each information where it is sought in the format specified in Para 4 of these Standards against transaction-based information.

Indicate ‘NA’, where the field is not applicable and ‘NIL’, where no comments have been provided.

(b) Certificates from the CEO or CFO or any other KMP of the Listed Entity and from every director of the Listed Entity who is also promoter (“promoter director”) to the effect that:

(i) the RPTs to be entered into are not prejudicial to the interest of public shareholders; and

(ii) the terms and conditions of the RPT are not unfavorable to the listed entity, compared to the terms and conditions, had similar transaction been entered into with an unrelated party.

However, if any promoter director does not provide such certificate, the same shall be informed to the Audit Committee and the shareholders, if it is a material RPT as specified in Para 1(1) of these Standards.

(c) Copy of the valuation or other report of external party, if any, shall be placed before the Audit Committee.

(d) If audited financial statements of the related party as required to be submitted to Audit Committee are not available for any financial year, the financial details shall be certified by the related party.

(e) In the case of the payment of royalty, management fees, service fees, etc., if any, shall be explicitly bifurcated and disclosed.

(f) In the case of the payment of royalty, the criteria for selecting Industry Peers shall be as follows:

(i) The Listed Entity will strive to compare the royalty payment with a minimum of three Industry Peers, where feasible. The selection shall follow the following hierarchy:

a. Preference will be given to Indian listed Industry Peers.

b. If Indian listed Industry Peers are not available, a comparison may be made with listed global Industry Peers, if available.

(ii) If no suitable Indian listed/ global Industry Peers are available, the Listed Entity may refer to the peer group considered by SEBI-registered research analysts in their publicly available research reports (“Research Analyst Peer Set”). If the Listed Entity’s business model differs from such Research Analyst Peer Set, it may provide an explanation to clarify the distinction.

(iii) In cases where fewer than three Industry Peers are available, the listed entity will disclose, that only one or two peers are available for comparison.

(g) If the Audit Committee has any comments on the line items as per the format specified in Para 4 of these Standards, it shall provide them accordingly. However, comments are required only for applicable line items, while non-applicable line items may be left blank.

G. STANDARDS FOR MINIMUM INFORMATION TO BE PROVIDED TO THE SHAREHOLDERS FOR CONSIDERATION OF MATERIAL RPTS:

(i) The explanatory statement contained in the notice sent to the shareholders for seeking their approval for an RPT shall provide the minimum information so as to enable the shareholders to take a view whether the terms and conditions of the RPT are favorable to the listed

(ii) The notice being sent to the shareholders seeking approval for any material RPT shall, in addition to the requirements under the Companies Act, 2013, include the following information as a part of the explanatory statement:

(a) Information as placed before the Audit Committee in the format as specified above of these Standards, to the extent applicable.

(b) The Audit Committee can approve redaction of commercial secrets and such other information that would affect competitive position of listed entity from disclosures to shareholders. Further, the Audit Committee shall certify that, in its assessment, the redacted disclosures still provide all the necessary information to the public shareholders for informed decision-making.

(c) Justification as to why the proposed transaction is in the interest of the listed

(d) Statement of assessment by the Audit Committee that relevant disclosures for decision- making were placed before them, and they have determined that the promoter(s) will not benefit from the RPT at the expense of public shareholders.

(e) Disclose the fact that the Audit Committee had reviewed the certificate provided by the CEO or CFO or any other KMP as well as the certificate provided by the promoter directors of the Listed Entity as required under Para 3(2)(b) of these Standards.

(f) Copy of the valuation report or other reports of external party, if any, considered by Audit Committee while approving the RPT.

(g) In case of sale, purchase, or supply of goods or services [as provided in B(2) in the format as specified in Para above of these Standards], or the sale, lease, or disposal of assets of a subsidiary, unit, division, or undertaking of the listed entity [as provided in B(7) in the format as specified in Para above of these Standards], if the Audit Committee has reviewed the terms and conditions of bids from unrelated parties then such fact shall be In case bids have not been invited, the fact shall be disclosed along with the justification thereof, and in case comparable bids are not available, state the basis for recommending that the terms of the RPT are beneficial to the shareholders.

(h) Comments of the Board/ Audit Committee of the listed entity, if

(i) Any other information that may be

Annexure – A

Format for Comprehensive Disclosure

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	FY 20xx-20xx
A(4). Details of previous transactions with the related party
10.	Total amount of all the transactions undertaken by the listed entity or subsidiary with the related party during each of the last three financial years. Note: Details need to be disclosed separately for listed entity and its subsidiary.
		S. No.	Nature of Transactions		Amount (in INR)

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Annexure – B

Format for Limited Disclosure

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Annexure – C

Format for Minimum Disclosures

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S. No.	Particulars of the information	Information provided by the management	Comments of the Audit Committee	Remarks
A(4). Details of previous transactions with the related party
10.	Total amount of all the transactions undertaken by the listed entity or subsidiary with the related party during each of the last three financial years. Note: Details need to be disclosed separately for listed entity and its subsidiary.
11.	Total amount of all the transactions undertaken by the listed entity or subsidiary with the related party during the current financial year (till the date of approval of the Audit Committee / shareholders).
12.	Whether prior approval of Audit Committee has been taken for the above mentioned transactions?
13.	Any default, if any, made by a related party concerning any obligation undertaken by it under a transaction or arrangement entered into with the listed entity or its subsidiary during the last three financial years.
A(5). Amount of the proposed transactions (All types of transactions taken together)
14.	Total amount of all the proposed transactions being placed for approval in the current meeting.
15.	Whether the proposed transactions taken together with the transactions undertaken with the related party during the current financial year is material RPT in terms of Para 1(1) of these Standards?
16.	Value of the proposed transactions as a percentage of the listed entity’s annual consolidated turnover for the immediately preceding financial year	%
17.	Value of the proposed transactions as a percentage of subsidiary’s annual standalone turnover for the immediately preceding financial year (in case of a transaction involving the subsidiary, and where the listed entity is not a party to the transaction)	%
18.	Value of the proposed transactions as a percentage of the related party’s annual standalone turnover for the immediately preceding financial year.	%
B. Details for specific transactions
B(1). Basic details of the proposed transaction (In case of multiple types of proposed transactions, details to be provided separately for each type of the proposed transaction – for example, (i) sale of goods and purchase of goods to be treated as separate transactions; (ii) sale of goods and sale of services to be treated as separate transactions; (iii) giving of loans and giving of guarantee to be treated as separate transactions)
1.	Specific type of the proposed transaction (e.g. sale of goods/ services, purchase of goods/services, giving loan, borrowing etc.)
2.	Details of the proposed transaction
3.	Tenure of the proposed transaction (tenure in number of years or months to be specified)
4.	Indicative date / timeline for undertaking the transaction
5.	Whether omnibus approval is being sought?
6.	Value of the proposed transaction during a financial year. In case approval of the Audit Committee is sought for multi-year contracts, also provide the aggregate value of transactions during the tenure of the contract. If omnibus approval is being sought, the maximum value of a single transaction during a financial year.
7.	Whether the RPTs proposed to be entered into are: (v) not prejudicial to the interest of public shareholders, and (vi) going to be carried out on the same terms and conditions as would be applicable to any party who is not a related party	Certificate from the CEO or CFO or any other KMP of the listed entity and also from promoter directors of the listed entity (as referred in Para 3(2)(b) of these Standards)
8.	Provide a clear justification for entering into the RPT, demonstrating how the proposed RPT serves the best interests of the listed entity and its public shareholders.

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