Guess how much TCS paid to use the Tata brand name in FY24

Tata Consultancy Services Ltd paid Rs 200 crore as brand equity to its promoter Tata Sons Pvt, according to a disclosure in its annual report for fiscal 2024.  

The figure is a 100 percent spike over the previous financial year. The country’s largest software services company has been paying Rs 100 crore as royalty to Tata Sons for the past five years.  

Tata Sons, the holding company of Tata Group, doubled the fee after five years. TCS, in its notice to shareholders, revealed that it made a royalty payout of Rs 200 crore to Tata Sons in FY24, the report added. 

TCS' royalty for the usage of the brand had been capped at Rs 100 crore from fiscal 2020 to fiscal 2023. In financial year 2020, 0.25 percent of the revenue for the company stood at Rs 328 crore, while 5 percent of pre-tax profit was Rs 2,100 crore. However, royalty paid stood at Rs 100 crore for that year. This became a trend till FY23, NDTV reported. 

Financial year 2024 saw a break in trend with the company paying double for using the brand. While 0.25 percent of revenue stood at Rs 506 crore, 5 percent of pre-tax profit came up to Rs 2,880 crore. TCS paid a royalty of Rs 200 crore for the year, NDTV reported quoting people in knowledge of the matter. 

Tata Sons has also stepped up its focus on brand-building through the title sponsorship of IPL, among other initiatives. 

Decoding the royalty fee

In 1996, Ratan Tata had first introduced the brand subscription scheme that required a group company, using the Tata name directly, to pay 0.25 percent of its annual revenue or 5 percent of its pre-tax profit, whichever was lower. A group entity that uses the Tata name indirectly had to pay 0.15 percent of its annual revenue, the report said. 

In 2015, Tata Sons, then led by the late Cyrus Mistry, capped the maximum brand subscription fee at Rs 75 crore. This was revised to Rs 100 crore by N Chandrasekaran in 2019.