Kingfisher trademark high on brand recall but low on brand valuation

MUMBAI: An attempt by a group of banks to recover loans given to Kingfisher Airlines, promoted by Vijay Mallya, by seizing nine trademarks of the now-defunct carrier may prove to be futile.


Brand and legal experts said the valuation of a trademark is deeply rooted with the revenue generated by the business. The airline has been grounded since October 2012 and the valuation of its trademarks will therefore be revised downwards, they said.

“It is likely that they will fail to recover their dues through this process as Kingfisher Airlines has not only been lying low since the last three years but over time has attracted negative publicity, which has eroded its goodwill,” said Rahul Chaudhry, managing partner at Lall Lahiri & Salhotra, an intellectual property law firm based in Gurgaon.

In 2009, for the first time ever, Mallya managed to convince State Bank of India, a conservative public sector bank, to accept an airline brand as collateral for an over Rs 2,000 crore loan.

“In 2009, Grand Thornton valued KF airline brand as collateral to raise loans by UB. The brand was valued at Rs 3,406 crore,” said Suhas Tuljapurkar, founder of law firm Legasis Partners.

According to Lall Lahiri & Salhotra, the value of a trademark is directly proportional to how much it can earn through goodwill, which can be established through various methods in which the duration of use and continuity of use play an integral factor. The valuation of Kingfisher Airlines’ trademarks when the airline was active and now can’t be the same.

“Banks should have moved early to monetise Kingfisher trademarks rather than sit idle for three years when it was apparent that Kingfisher Airlines was doomed to fail. Now, it is to be seen if aparty comes up who is willing to invest in the airline business and re-run operations under Kingfisher tagline,” Chaudhry said.

In India, it is acceptable for banks to take reputed trademarks as collateral while sanctioning loans to companies. Unlike borrowings where lenders typically turn to physical assets such as inventory, machinery or real estate to determine size of the loan and terms, a company can borrow a percentage of the value of certain intellectual property, using them as collateral.

Brands by themselves have no ascertainable financial value unless they are in use and attract a stream of customers. Banks are interested in access to an asset that can be easily monetised if a borrower fails to meet its obligations.

Globally, companies have leveraged the value of their brands to open lines of credit. Walt Disney had done so in 1988 to raise as much as $725 million in the Japanese market. Calvin Klein, through brand collateralisation linked to future sales of its perfume products, raised $58 million in 1993.

In India, Gurgaon-based LT Foods used its rice brand Daawat as collateral to fund the acquisition of US-based rice company Kusha Inc. However, the Kingfisher case is not the same – it is an instance of banks acquiring a company’s intangible assets after it defaulted on the payment of loans. While the Kingfisher Airlines trademarks may have taken a beating, a range of Kingfisherbranded beers owned by Mallya’s UB Group score very high on valuation, recall and sales.

“To the end consumer, it doesn’t matter if Mallya once owned the beer brand and is now absconding. They will continue to buy the brand irrespective of all controversies around Mallya,” said a top brand consultant on condition of anonymity.