Months later, a hard-hitting series of reports from Viceroy Research and a Supreme Court (SC) litigation blew the lid off what seems to be a brazen royalty mining, avoiding disclosure rules. Vedanta, it turns out, had been extracting ‘brand fees’, sometimes as high as 3% of turnover, through ad-hoc sub-licensing agreements. Astonishingly, the ‘brand’ being paid for is a trademark never used by Hindustan Zinc, and is managed from an empty London office!
Worse, it turned out that no board approvals were sought, despite the government continuing to hold a 29.5% stake in the former public sector entity, and the shareholder agreement requires board consent for loans exceeding Rs20 crore or related-party transactions.
Investor and shareholder activist Girish Mittal filed an intervention application in a public interest litigation (PIL) seeking a halt to payments until proper resolutions are passed, as well as the clawback of payments made and an independent audit. The PIL points to a breach of disclosure rules and calls the fees ‘unjustifiable and harmful to investors’. The revelations led to a probe by the directorate of enforcement (ED), prompting Vedanta to hastily refund over Rs1,030 crore. But what about the fact that the money, which should have gone into dividend payment or debt reduction for minority investors, was being routed to Vedanta Resources? We have yet to see any action on this front.
Brand Fees: A Mushrooming Problem
While the Vedanta case is egregious because of the lack of disclosures, brand fees and royalty payments to promoter entities and foreign parent companies have mushroomed across corporate India over three decades. The fees are justified as covering the use of trademarks, logos, or ‘reputation’. Sometimes, these include licensing for technology. In practice, the payments are opaque, frequently inflated and have often been extracted even when companies are bleeding losses.
From Tata Sons to Mahindras, JSW Steel, Godrej, Nestlé, Suzuki, Sony and Colgate, large sums flow out of listed Indian entities every year in the name of brand values. In 2018, the Uday Kotak committee on corporate governance had recommended that royalties and related-party payments exceeding 5% of annual consolidated turnover should be approved by minority shareholders. The goal was to introduce a mechanism for shareholder oversight in such transactions, ensuring that companies paid fair value for the brand and royalty services.
In 2024, Securities and Exchange Board of India (SEBI) came out with a landmark study on royalty payments by 233 listed companies, which showed that Rs10,800 crore was paid by them in FY23-24 alone. In a quarter of these companies, payments exceeded 20% of profits. Worse, 63 companies shelled out royalties to the tune of Rs1,355 crore, even while making losses.
Like Vedanta, several cases are highly controversial, even bordering on farce. The investigation into Kingfisher Airlines, controlled by Vijay Mallya, had revealed how banks accepted the Kingfisher brand as collateral at an astonishing valuation of Rs3,406 crore without any independent verification into how it could be encashed in the event of default. The valuation by Grant Thornton had explicitly stated it was ‘only for internal accounting’.
Even earlier, in 1998, the income-tax appellate tribunal (ITAT) had disallowed payment of a commission by Punjab Breweries, one of Mr Mallya’s liquor companies, to his ex-wife Sameera on the claim that her presence in social circles helped the company’s business (1998 67 ITD 107 Chd, 2000 245 ITR 49 Chandigarh). The tribunal ruled that there wasn’t sufficient evidence of any genuine service offered by her to the company.
Another travesty, which was withdrawn after proxy advisors raised objections, was Jubilant FoodWorks’ attempt to funnel 0.25% of revenues to a promoter entity as brand fees in 2019. The company sells pizzas and doughnuts under the global brands Domino’s and Dunkin’ Doughnuts, for which it paid royalties abroad. That fact didn’t stop it from trying to extract a further payment for the redundant ‘Jubilant’ brand.
Then there is the JSW Steel case. In 2014, it decided to pay 0.25% of turnover, or roughly Rs125 crore annually to JSW Investments Pvt Ltd, owned by promoter Sajjan Jindal's wife, Sangita Jindal. The proposal was approved, despite strong opposition by proxy advisors. Institutional Investor Advisory Services (IiAS) had said it “creates conflicts of interest and dilutes minority shareholder value," but it made no difference.
However, tax authorities are having more success with questioning royalty payments. In August 2025, the income tax appellate tribunal (ITAT) at Delhi slashed royalty payments by Sony India Pvt Ltd, as ‘excessive’ relative to services rendered, in a transfer pricing case. This case is set to become a benchmark for royalty payments by multinationals as more such cases attract tax scrutiny.
Despite these controversies, brand fees and royalties have continued to grow steadily since the 1990s when Ratan Tata decided that group entities would pay Tata Sons for use of the ‘Tata’ name, and the money would help fund their philanthropy. Companies have pushed ahead with brand fees, often with shareholder approval secured through promoter voting blocs.
As SEBI’s study noted, there was little independent assessment of whether brand fees deliver real value. Controversies over brand fees and royalties are a global phenomenon. Tax authorities worldwide see royalties as a vehicle for base erosion and profit shifting (BEPS), and yet, the brand licensing market was estimated at US$369.6bn in 2025 and is projected to keep growing.
The original rationale for brand royalty was sound: companies gain from group reputation, shared intellectual property, or parent-company technology. But, in practice, it has often degenerated into a shadow channel for promoters to siphon off cash at the expense of minority shareholders.
In 2025, SEBI required audit committee scrutiny of material related-party transactions and insisted on disaggregated disclosures for payments exceeding Rs1,000 crore. Yet, the Vedanta case makes clear that disclosure rules, by themselves are no deterrent. When promoters control boards and dominate shareholder votes, ‘approvals’ amount to little more than rubber stamps.
Proxy advisors and shareholder activists have repeatedly flagged the abuse of brand and royalty payments with limited impact. But since tax authorities have proved more effective (creating interesting precedents in cases involving Mahindra and Sony India), it raises an awkward question: Will it fall to the taxman, rather than the market regulator, to keep brand royalties in check?
That certainly seems to be the case, unless SEBI tightens regulations further to disallow—blanket approval of fees, mandates independent valuation with justification, enforceable claw-back rules and clear penalties for flouting rules.
As the PIL against Vedanta drags through the courts and enforcement agencies circle, the larger debate over brand fees is unlikely to abate. In principle, brand royalty should represent a fair payment for genuine value delivered, not a shadow channel for promoter enrichment. Only real transparency and competitive justification can ensure that India’s listed companies serve all shareholders equitably.
There is always a good reason to do the wrong thing. On 12 September 2025, the Securities and Exchange Board of India (SEBI), at its board meeting, approved significant changes to the minimum public shareholding (MPS) norms for large...
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