Institutional EYE

Commentary on Corporate Governance Issues

Multinationals in India: Breeding corporate royalty

The CNX MNC Index has outperformed the CNX Nifty over the past five years: but does that allow parents of multinational companies (MNCs) in India to dip into the cashbox and take as much royalty as they please? The top five royalty payouts in 2014-15 (Maruti, HUL, ABB, Nestle and Bosch – in that order) aggregated Rs.47.7 bn (Table 1 on page 2), up from Rs.42.5 bn in 2013-14. Royalty payouts were 24% of aggregated pre-tax pre-royalty profits and 4.4% of aggregated net sales of these five companies for 2014-15. In a recently published report titled ‘Royalty flows in Suzuki’s blood’, IiAS demonstrated that, over a 15-year period, Maruti’s royalty payouts to Suzuki outpaced revenues, per car rea

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