Tata Consultancy Services Ltd (TCS) has made a significant payment of Rs 200 crore in brand equity to its promoter, Tata Sons Pvt, according to its annual report for fiscal 2024. This figure represents a 100% increase from the previous financial year, marking a substantial rise from the Rs 100 crore TCS has been shelling out annually for the past five years.
So, what’s the story behind this hefty royalty payment? Tata Sons, the grand overseer of the Tata Group empire, decided it was time to double the fee after five years of holding steady. In a notice to shareholders, TCS revealed it made a Rs 200 crore royalty payout to Tata Sons in FY24.
From fiscal 2020 to 2023, TCS’s royalty payments were capped at Rs 100 crore. To put it in perspective, in fiscal 2020, 0.25% of TCS’s revenue amounted to Rs 328 crore, and 5% of its pre-tax profit was Rs 2,100 crore. Despite these figures, the royalty stayed at Rs 100 crore. This trend held until FY23, according to NDTV.
However, fiscal 2024 broke this trend with TCS paying double for the privilege of using the Tata brand. According to NDTV, for FY24, 0.25% of the revenue amounted to Rs 506 crore, and 5% of the pre-tax profit totaled Rs 2,880 crore, resulting in a royalty payment of Rs 200 crore.
Tata Sons has been ramping up its brand-building efforts, with initiatives like the title sponsorship of the IPL, among other ventures.
A little historical context: In 1996, Ratan Tata introduced a brand subscription scheme requiring any group company using the Tata name directly to pay 0.25% of its annual revenue or 5% of its pre-tax profit, whichever was lower. Companies using the Tata name indirectly had to pay 0.15% of their annual revenue.
Fast forward to 2015, Tata Sons, under the late Cyrus Mistry, capped the maximum brand subscription fee at Rs 75 crore. This cap was revised to Rs 100 crore by N Chandrasekaran in 2019. And now, here we are with TCS’s latest Rs 200 crore brand equity payment, reflecting both the value and the cost of maintaining such a prestigious brand.
Read More News : Click here
