In an open relationship

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Related-party transactions seem to be a way of life for India's family owned businesses due to the diversity of their operations. In FY13, the latest year for which numbers are available, listed companies from India's top 10 business houses reported related-party transactions worth Rs 1.03 lakh crore, equivalent to 6.7 per cent of revenues and 43 per cent of their operating profit. The figures exclude transactions with subsidiaries and joint-venture companies but include other transactions (see table below). In absolute terms, Adani group tops the chart with related-party transactions accounting for nearly two-thirds of the group's combined revenues in FY13, followed by Essar, Tatas and Anil Dhirubhai Ambani (ADA) group companies. As a share of operating and net profit, however, Adani and ADA companies are at the top with the value of related-party transactions exceeding the group's combined net profits last year. However, there is nothing inherently wrong about this and companies say that all related transactions are done on an arm's length basis and approved by the audit committee of their boards and vetted by their auditors. A disproportionately high related-party transaction figure for a few groups would, however, worry minority shareholders for the company's inability to decrease dependence on other group companies.