Brand value league table construct
In setting out to value India's top value creating brands, the primary requisite was that brands should belong to companies that are listed on the Bombay Stock Exchange, which is why brands such as Amul, Kingfisher Airways did not come in to the c...
In setting out to value India's top value creating brands, the primary requisite was that brands should belong to companies that are listed on the Bombay Stock Exchange--which is why brands such as Amul, Kingfisher Airways did not come in to the consideration set.
To gain an insight into each companies' past and current performance it is necessary to obtain five years of historic revenues and its current market value. All financial information was obtained during January-December 2007 using Bloomberg and other publicly available sources.
Evaluation of the top 500 Indian companies (by market cap) was used to arrive at the Brand Finance Top 50. At this stage it was necessary to eliminate any companies with a substantial portfolio of stand alone brands (like Hindustan Unilever) or sectors in which the brand did not play a substantial role. This was conducted through analysis of broker reports, annual reports and market research. Only public data was used--the data that the brand-owning companies publish about itself (in annual reports, analysts briefings, press articles, syndicated market research, et al). There was no access to private data or to senior management interviews as there would be in a formal valuation.
The valuation was performed by Brand Finance using the 'Relief from Royalty' approach. This is an intuitively simple approach that assumes that a company does not own its own brand and calculates how much it would need to pay to license it from a third party. The present value of that stream of (hypothetical) royalty payments represents the value of the brand.
We used the 'Relief From Royalty' methodology for two reasons--first, it is the valuation methodology that is favoured by the fiscal and tax authorities (IRS and Inland Revenue) and the courts because it calculates brand values by reference to documented, third-party transactions; and second, because it can be performed on the basis of publicly available financial and marketing information. Researchers then estimate brand royalty rates for each of India's largest industry sectors. Those rates are then adjusted for each company after having understood its brand strength from poring over market surveys, consumer research and investor relations material.
The brand value or trademark value is the value of the asset at a certain point of time, computed by adopting this methodology. This in fact, is the value that the brand is creating for their 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. The brand valuations draw upon publicly available information, which has not been independently investigated by Brand Finance or ET. Valuations do not represent a guarantee of future performance of the brands or companies.
To gain an insight into each companies' past and current performance it is necessary to obtain five years of historic revenues and its current market value. All financial information was obtained during January-December 2007 using Bloomberg and other publicly available sources.
Evaluation of the top 500 Indian companies (by market cap) was used to arrive at the Brand Finance Top 50. At this stage it was necessary to eliminate any companies with a substantial portfolio of stand alone brands (like Hindustan Unilever) or sectors in which the brand did not play a substantial role. This was conducted through analysis of broker reports, annual reports and market research. Only public data was used--the data that the brand-owning companies publish about itself (in annual reports, analysts briefings, press articles, syndicated market research, et al). There was no access to private data or to senior management interviews as there would be in a formal valuation.
The valuation was performed by Brand Finance using the 'Relief from Royalty' approach. This is an intuitively simple approach that assumes that a company does not own its own brand and calculates how much it would need to pay to license it from a third party. The present value of that stream of (hypothetical) royalty payments represents the value of the brand.
We used the 'Relief From Royalty' methodology for two reasons--first, it is the valuation methodology that is favoured by the fiscal and tax authorities (IRS and Inland Revenue) and the courts because it calculates brand values by reference to documented, third-party transactions; and second, because it can be performed on the basis of publicly available financial and marketing information. Researchers then estimate brand royalty rates for each of India's largest industry sectors. Those rates are then adjusted for each company after having understood its brand strength from poring over market surveys, consumer research and investor relations material.
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The brand value or trademark value is the value of the asset at a certain point of time, computed by adopting this methodology. This in fact, is the value that the brand is creating for their 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. The brand valuations draw upon publicly available information, which has not been independently investigated by Brand Finance or ET. Valuations do not represent a guarantee of future performance of the brands or companies.
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