India Inc. wakes up to brand values

Pritish Nandy Communications (PNC), a film production house that has produced well known films like Hazaaron Khwaishein Aise, Chameli, Jhankar Beats and Bollywood Calling, to name a few, wanted to find out to what extent the PNC brand was able to add value to the business and how the company’s commercial activities influenced Brand PNC? It embarked on a brand valuation exercise and realised that the PNC brand was worth Rs 265 crore as on January 2007.

Similarly, a few months ago, Godrej Consumer Products (GCPL) got a valuation study done for its top five brands. The results showed that the value of its top five brands—Cinthol, Fairglow, Godrej No.1, Ezee and Godrej Powder Hair Dye—was Rs 3,900 crore, much higher than it had estimated.

Adi Godrej, CMD, GCPL, says: “The objective was to understand what the valuation of these brands would be and to identify the demand drivers for each. This exercise will help us enhance these values through improvements in our operations.”

Hosehdar Press, Executive Director and President of GCPL, adds: “The guidelines suggested to us by the brand valuation study will help us add value to our brands.”

Experts say that brands will be major drivers of corporate value in the 21st century. There is now widespread acceptance that brands play an important role in generating and sustaining the financial performances of businesses. M. Unni Krishnan, MD, Brand Finance India, the Indian arm of the eponymous global consultancy firm, explains: “In India, brand valuation is changing from being a mundane academic exercise to a management tool that is helping companies in their quest to become global players.”

In India, the Tata Group undertakes brand valuation exercise on a regular basis, and is, in fact, the only Indian conglomerate to figure among the top 250 valuable global brands (it ranked #57 on Brand Finance’s Top 500 global brands list). Many more homegrown companies are following this route now.

Apart from GCPL and PNC, companies like the Cholayil Group (which makes the Medi Mix brand of soap), Chateau Indage, one of India’s leading wine makers, and Surya Food & Agro, which makes Priya Gold biscuits, have undertaken brand valuation exercises.

So what’s the rush? “More companies are getting listed, or heading abroad to raise capital. Then, there’s a flurry of mergers and acquisitions. Global accounting standards mandate companies to be transparent about their business operation; and this includes listing brand valuation figures in financial statements,” says Unni Krishnan.

R. Gopalakrishnan, Director, Tata Sons, explains: “Some of the drivers (behind this rush to get brands valued) are a general interest in branding. Then, valuing brands can improve negotiating positions in a mergers & acquisition scenario. Lastly, there is a fiscal aspect, which is why many companies want to know the value of the brands they own.” GCPL’s Press adds: “Brand value is a good way to measure whether a marketing strategy has been successful. It helps you understand where your brand stands in the market place.”

The International Accounting Standards Board (IASB) has issued a new standard FRS 3, which requires all listed companies to mention the value of acquired brands and intangible assets on their balance sheets. “There is also a growing realisation among companies that cutting costs is not the only way to create value. Brands are central to businesses, and, therefore, cannot be left unaccounted for,” says Unni Krishnan. So, expect many more companies to begin announcing the values of their brands in the months to come.

—Anusha Subramanian