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These are India's most valuable brands
David Haigh and Unni Krishnan
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April 11, 2006

The 25 brands in the Brand Finance league table are ranked on brand value: the value of the asset at a point in time assessed using the relief royalty method.

A prerequisite of the top Indian brands was that they were listed in the top 500 on the Bombay Stock Exchange - which is why brands like Hutch, Sahara India Pariwar and Kingfisher Airlines were not included. The top 500 by market capitalisation were shortlisted to 50, of which the top 25 made the final ranking.

In some cases, the lack of information on the Indian businesses of certain major international brands (Coca-Cola, Pepsi and so on) meant they had to be left out. Holding companies that own a portfolio of branded businesses (Hindustan Lever [Get Quote], for instance) were excluded, since it isn't possible to identify revenue streams for individual brands from publicly available sources.

Not surprisingly, Indian Oil Corporation [Get Quote] emerges as the most valuable brand with a trademark value of $5.6 billion.

This value accounts for 40 per cent of IOC's market value, representing the amount by which the brand is likely to enhance the company's future cash flows. But despite its high value IOC is at risk of losing the brand revenues it currently enjoys to more powerful brands like Bharat Petroleum in the future.


(Rs m) 

Indian Oil Corporation250,636
State Bank Of India [Get Quote]137,965
Bharat Petroleum Corp Ltd134,673
Tata Consultancy Services [Get Quote]123,485
Reliance Industries [Get Quote]122,240
Hindustan Petroleum Corp Ltd116,271
Oil & Natural Gas Corp 88,822
Tata Motors [Get Quote] 84,652
ICICI Bank [Get Quote]76,777
Wipro [Get Quote]67,681
Infosys Technologies63,534
Gail India [Get Quote]58,178
Bharti Televentures54,018
Tata Steel [Get Quote]44,059
Larsen & Toubro39,658
Ranbaxy Laboratories [Get Quote]29,038
Bajaj Auto [Get Quote]27,186
Satyam Computer Services [Get Quote]24,302
Hero Honda Motors [Get Quote]20,580
Industrial Development Bank of India18,830
Housing Development Finance Corp14,665
HDFC Bank [Get Quote] 11,992
Jet Airways [Get Quote] India 10,410
Grasim Industries [Get Quote] 8,003

State Bank of India and Bharat Petroleum Corp follow in second and third place respectively, with brand values of just over $3 billion each. SBI has improved its brand power by engaging with consumers and developing products and services that are differentiated.

However, the bank still has enormous value potential and has only scratched the surface as of now. If SBI continues to invest in marketing and pushing up its service delivery, it will give other banks a run for their money.

Meanwhile, BPCL's [Get Quote] pioneering efforts in retail marketing, including branded petrol, petrocards, fleet cards, convenience stores, one-stop shops and its "Pure for sure" logo still give it the edge over other oil PSUs. It is aggressively looking at increasing non-fuel revenues by leveraging its brand.

The first set of private sector brands, Tata Consultancy Services and Reliance Industries, follow, both worth over $2.7 billion each.

It will be interesting to see how the two brothers extract value from the Reliance brand in future, given that Reliance Communication Ventures is now listed and Mukesh Ambani's retail plans are in overdrive. There are also some strategic issues that remain unresolved, including how the corporate brands of the two groups will be separated and yet at the same time keep the Reliance brand robust.

The top echelons have some diversity in terms of Tata Motors, demonstrating the company's focused strategy of cross-border acquisitions, strategic alliances and a steady stream of new product launches - Ace, Dicor, Starbus and Globus and its commitment to build the Rs 1 lakh car. This brand is ready to make a global mark.

Smaller banks, such as ICICI Bank, are rapidly boosting their brand power by offering customers holistic financial services and a certain level of functional and service delivery.

While SBI and Bank of Baroda [Get Quote] are waking up to the role of the brands inside their businesses, ICICI Bank is now trying to forge an emotional connection with its customers with its Hum hai na communication. 

The benefits of ICICI leveraging its brand are visible - it has registered 95.61 per cent five-year CAGR growth of fee income. Fee income is a good barometer to gauge a bank's efficiency in using its brand and customer capital through cross selling. All other Indian banks - including HDFC Bank - have a lot of catching up to do.

Despite the fact that TCS is smaller in terms of brand value than IOC, it is India's most powerful brand in terms of its ability to sustain earnings into the future with the least risk. If TCS continues build up intellectual property, create strategic alliances and extend its footprint into new services where it can extract volume and premium, its rise in the value table will not be surprising.

Wipro emerges as the second most valuable and powerful IT brand. This comes after a year of acquiring firms, giving Wipro access to new skills and intellectual property, upping marketing spends and ramping up to scale the consultancy target.

Wipro's product engineering and design services are especially pushing hard to deliver on innovation to create and sustain revenue streams for the future. The evidence towards a more IP and marketing driven model lies in the number of patent applications that have been made by TCS and Wipro over the past three to four years.

For an industry caught between run-of-the-mill software services and high-end products, IP licensing and sales will not only boost financial returns but also build long-term competitive advantage.

Infosys [Get Quote] has made some inroads into high end consulting. However, it needs to urgently review its IP and marketing investments and come out victorious in the battle to protect its well-known trademark.

Despite the fact that Indian IT companies have created some salience in the global IT market, they trail when it comes to intellectual property and brand building skills. As labour arbitrage slips away, it is only the exponential value created by intangibles like the brand and IP that will propel them into the +$10 billion league of global players.

Ranbaxy is the only pharmaceutical brand to make the cut in terms of brand value. While Ranbaxy leads the pack in terms of IP development and filings, it is worth noting that Indian pharmaceutical companies are way ahead in IP development compared to their software peers.

Clearly, patents and brands will drive their business models in the medium term as their mainstay generics business is getting increasingly crowded and margins come under acute pressure. The only way forward is to develop a pipeline of new products backed by marketing and intellectual capital muscle.

There is an interesting story unfolding in the motorcycle industry and brands are at the centre of it. Hero Honda Motors has a spectacular track record; however, there is a tricky question facing the company.

Is it Honda that is making it a Hero? Bajaj has evolved into a mature stand-alone brand post its divorce from Kawasaki and has even gone on to develop proprietary technology.

As Honda Motorcycle and Scooter India aggressively invests in production capacity and sub brands like Unicorn and Shine, Hero Honda's future brand earnings are far more at risk than Bajaj's.

The key takeawaysBrand power is in your hands: As the constraints on capital, technology and regulatory environment lifts, the heavy bias towards companies who enjoyed monopolistic markets is shifting to high octane, customer savvy companies.

Who will customers turn to? Who will they award their loyalty to over time? The Brand Finance index of India's most powerful brands is peppered with a set of diverse companies across various sectors, including airlines, steel, automotives, telecommunications, banking and FMCG.

Clearly the economic role of the brand is not limited by the industry type or size; if leveraged it can be a great leveller.

Brand power matters: Brands with the ability to cut through this highly competitive and maturing marketplace will determine who can secure the lucrative cash flows in the future.

This is partly about scale and technology; however, it is also about investing in and building brands that work - brands that matter more to customers and employees, and which effectively innovate to sustain relationships that ensure value creation.

Importantly, there is a mind shift required to delegate the supervision of tangible assets (land, buildings and factories, laying lines and towers) to operational managers and redirect top management attention and time to building value in intangible assets.

To unlock this huge reservoir of value, boards and CEOs have to insist on a governance framework that analyses the impact of brand and other intangible assets on shareholder value.

(David Haigh is group CEO, Brand Finance; Unni Krishnan is MD, Brand Finance, India)

Methodology: How we did it

The list of most valuable brands was calculated using the royalty relief approach. This intuitively simple approach assumes a company does not own its own brand and calculates how much it would need to pay to license the brand from a third party. The present value of that stream of (hypothetical) royalty payments represents the brand value.

The royalty relief methodology was chosen for two reasons. Firstly, tax authorities and courts favour this methodology because it calculates brand values by reference to documented, third-party transactions; and secondly, because it can be performed on the basis of publicly available financial information. This method also ensures these results are directly comparable year on year.

Only public data was used to calculate the value of the top Indian brands - the data that the brand owning companies publish about themselves (in annual reports, analysts briefings, press articles, syndicated market research and so on). There was no access to private data or to senior management interviews as there would be in a formal valuation.

Moreover, the brands were looked at without further segmentation: TCS, for instance, was assessed as a whole, whereas valuing it formally would have entailed aggregating it from a series of perhaps 30 segments separated by verticals and by geography.

The brand value is the value of the asset at a certain point of time. This, in fact, is the value that the brand is creating for its owners today from its current economic use. It is not an attempt to estimate the cost of replacing it, nor does it represent what has been expended to create it.

A four-step process was applied to arrive at the brand value. Obtain brand-specific financial and revenue data; establish royalty rate for each brand, calculate brand strength score and determine royalty rate range; calculate future royalty income stream; and lastly, discount future royalty stream to a net present value, which is the value of the brand.

David Haigh is group CEO, Brand Finance; Unni Krishnan is MD, Brand Finance, India.

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