Tata Group Companies to pay higher royalties to Tata Sons

10 May 2024 , 05:11 PM

According to a May 10 ToI report, TCS, Tata Steel, and Tata Motors, among others, will now be required to pay twice as much in royalties to Tata Sons.

Businesses that use the Tata name are required to pay Tata Sons, the brand's owner, royalties. According to the ET report, Tata Sons has increased the royalty price to ₹200 Crore.

After keeping it at ₹100 Crore for five years, Tata Sons has chosen to raise its charge, thereby doubling it. Simultaneously, the organisation in charge of the Tata Group is stepping up efforts to improve brand recognition, one of the ways being done is by partnering with the IPL as the title sponsor.

TCS said in a shareholder statement that it gave Tata Sons a royalty payment of ₹200 Crore in the fiscal year 2024.

In 1996, Tata Sons' chairman emeritus Ratan Tata launched the brand subscription programme. A Tata group firm using the Tata name directly was obliged to pay 5% of its pre-tax profit or 0.25% of its yearly revenue, whichever was smaller, under this plan. In the meantime, 0.15% of the yearly turnover of a Tata firm utilising the Tata name was indirectly required to be paid.

Under the direction of the late Cyrus Mistry, Tata Sons established a ₹75 Crore upper ceiling for the brand subscription fee in 2015. Later on, under the current chairman N Chandrasekaran, this restriction was increased by 33%. TCS paid Tata Sons ₹100 Crore each in the fiscal years 2023 and 2022 as part of this subscription fee.

The brand subscription fee is one of Tata Sons' sources of income. It made ₹1,008 Crore from brand subscriptions in the fiscal year 2023.

The large growth of the brand subscription fund throughout time can be attributed to the notable fluctuations in the financial performance of the running firms, which have included the acquisition and expansion of multibillion-dollar businesses. From ₹820 Crore in FY22 to ₹1,008 Crore in FY23, Tata Sons' brand subscription income increased by 23%. The holding company uses this money to protect and grow the Tata brand, which is estimated by global consulting firm Brand Finance to be worth $29 billion (about ₹2.4 Lakh Crore).

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