Related-party transactions: what to look for
A related-party transaction is a dealing between a company and someone close to it, such as a promoter, a director, a subsidiary or an associate. Such dealings are normal in many groups, and they are disclosed because they are not arm's-length by default.
Where to find them
The notes to the financial statements contain a related-party section. Listed companies also make periodic disclosures to the stock exchanges.
Questions to ask
- What is the size? Compare each transaction with revenue, profit and net worth.
- What is the nature? Sales, purchases, loans, guarantees, rent, royalties or management fees all carry different risks.
- Is it priced at market terms? Look for the company's statement and any independent support.
- Is it recurring or new? A sudden new category deserves a reason.
- What approvals applied? Check whether the audit committee and, where required, shareholders approved it.
- Are loans and advances to related parties growing? Compare balances over several years.
Limits
A large related-party balance is not proof of wrongdoing. The point is to read the disclosure, understand why the arrangement exists, and see whether the company's own explanation matches the numbers.
Sources and further reading
- Securities and Exchange Board of India (SEBI), circular "Disclosure obligations of listed entities in relation to Related Party Transactions", 7 January 2022, which refers to Regulation 23 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and to disclosure of related party transactions to stock exchanges. sebi.gov.inLink opened 12 October 2026
- Further reading, not opened by us: Ind AS 24, Related Party Disclosures; and the Companies Act, 2013 provisions on related party transactions and audit committees. Find the current text on mca.gov.in and the SEBI regulations on sebi.gov.in.
Entries marked “Link opened” were opened by Pokharna Research on 12 October 2026 and the publisher, date and headline matched the description given. Entries without that mark have not been opened by us; please locate them on the publisher’s own website. Web pages can change or move. Where a statement in this note is a general characterisation rather than a cited fact, it is not tied to a specific source.