₹200cr for Tata name: Group firms face increased royalty fee
What's the story
Tata Sons, the primary holding company of Tata Group, has announced a significant increase in the royalty fee for its operating companies.
The fee, paid by these companies for using the Tata brand name, has been raised to ₹200 crore from ₹100 crore set five years ago.
This change affects several key operating companies within the group such as TCS, Tata Steel, and Tata Motors.
Payment confirmation
TCS confirms royalty payment to Tata Sons
TCS, one of the key operating companies within the Tata Group, recently informed its shareholders that it has made a royalty payment of ₹200 crore to Tata Sons in FY24.
The increase in royalty fees comes alongside Tata Sons's intensified efforts toward brand-building initiatives such as title sponsorship of the Indian Premier League (IPL).
Scheme history
Evolution of Tata's brand subscription scheme
The concept of a brand subscription scheme was first introduced by Ratan Tata in 1996.
Under this scheme, any group company using the Tata name directly had to pay either 0.25% of its annual revenue or 5% of its pre-tax profit, whichever was lower.
In contrast, a group entity using the Tata name indirectly had to contribute 0.15% of its annual revenue.
Fee evolution
Changes in brand subscription fee over the years
In 2015, under Cyrus Mistry's leadership, Tata Sons set a cap on the maximum brand subscription fee at ₹75 crore.
This limit was later raised to ₹100 crore by N Chandrasekaran in 2019.
Now, with the fee doubled to ₹200 crore, Tata Sons has also eliminated the option for group companies to pay based on pre-tax profit.
Consequently, an operating entity will now be required to pay 0.25% of its annual revenue up to a maximum fee of ₹200 crore.