Related-party transactions

A "related party" is anyone close to the company - promoters, directors, their immediate family, companies they own or control, key management personnel. A related-party transaction (RPT) is a deal between the listed company and any of these.

Why these matter

In any listed company, the promoter family typically owns 30-60% of the shares. The other 40-70% is held by minority shareholders - the public, mutual funds, FIIs. Both share in profits proportionate to their holding.

But if the listed company:

• Pays the promoter family unusually high "consulting fees"
• Buys raw materials from a promoter-owned company at above-market prices
• Sells its own product to a promoter-owned company at below-market prices
• Lends money to a promoter-owned entity (often forgotten on the balance sheet later)
• Leases office or factory space from a promoter at above-market rent

… then the listed company is effectively transferring value from minority shareholders to the promoter family. This is the #1 way Indian retail investors silently lose money over a 5-year horizon.