Brand Royalty: Smart Brand-Building Or Easy Money For Holding Companies?

It is a low-hanging fruit, but surprise, surprise, many business houses seem to have overlooked it, save for a few. So, it came as a pleasant surprise when Kumar Mangalam Birla, who heads the $72-billion (Rs 6 lakh crore) Aditya Birla Group, made public his group’s plans to introduce a brand fee for companies operating within the group. One felt it was better late than never. Sure, he was going the Tata way.

The Aditya Birla Group has over 40 listed and unlisted companies operating across 20 industries. Effective June 2026, these companies will start paying Birla Group Holdings Pvt Ltd a royalty of 0.25% of their revenue for using the Aditya Birla brand name. The maximum amount a company can pay is capped at Rs 225 crore.

According to Mint’s calculations, “The fee could generate more than Rs 1,000 crore a year for the group’s privately-owned promoter entity Birla Group Holdings Pvt Ltd.” This is money for jam — an easy revenue stream. This number will keep swelling as the group has 11 listed companies and a significant number of unlisted companies whose revenues are bound to grow by leaps and bounds, if the past track record is any indication.

Simply put, a brand fee or royalty is similar to what a shopping mall charges its tenants for common-area maintenance and overall branding.

The original architect of charging a brand fee from group companies in India was the late Ratan Tata. He did it some three decades ago, and there was a reason why he struck upon this novel idea.

Let me put it in context. In 1991, when Ratan Tata was appointed Chairman of Tata Sons and, effectively, the Tata Group, all hell broke loose. Then “satraps” like Russi Mody (Tata Steel), Ajit Kerkar (Indian Hotels), Darbari Seth (Tata Chemicals) and Sumant Moolgaokar (Tata Motors) were powerful figures, and Ratan Tata’s leadership was not accepted easily. Each of these satraps was virtually running his company like a fiefdom.

This disturbed Ratan Tata. He wanted consumers, employees and investors to recognise Tata as the overarching identity, with Tata Sons, the holding company, at the centre and owning the Tata name. The outside-in view should show the Tatas as a single entity. So, he mooted the idea that if operating companies wanted the benefit of that name, they had to enter into a formal relationship with the promoter, Tata Sons, and pay a royalty. The group companies eventually went along with Ratan Tata’s plan. Effectively, this route strengthened Tata Sons’ institutional influence over group companies that had historically enjoyed considerable autonomy.

Every company using the Tata brand had to embrace the Tata Code of Conduct, besides entering into the Brand Equity & Business Promotion arrangement. In turn, Tata Sons assumed obligations covering corporate communications, brand protection, specialist advisory services, group-wide management resources, business excellence, legal support, HR development and the promotion of common standards.

Thus, the brand fee was introduced by Tata Sons in 1996. To reiterate, it was not merely about collecting 0.25% of revenue by way of fees. It was about using the Tata name as the glue that could bind a confederation of corporate fiefdoms into one cohesive group.

The results are there for all to see. The cash register, by way of brand fees, has been ringing louder every year. In FY2026, Tata Sons earned Rs 2,294 crore — a 23% increase over the previous year.

To my mind, the whole idea of charging a brand fee to group companies is akin to an annuity scheme. Once you set the rules of the game, the meter starts ticking, and by the end of every financial year you receive hefty fees from a clutch of companies in your stable. It seems hassle-free as the framework is clearly defined.

There is no readily available published data on how many Indian business houses have introduced brand-fee models within their groups. But the practice does exist, with the nomenclature varying from brand royalty, brand fee and trademark licence fee to brand subscription and management fee.

It may be noted that, historically, many MNCs operating in India have repatriated fees to their parent companies for the use of trademarks, patents, technology or other intellectual property. PwC describes the licensing of trademarks, trade names, technology, software and patents between related multinational entities as a common practice.

The best example is Unilever. Hindustan Unilever pays its parent group, Unilever, 3.45% of its turnover for trademarks, technology and central services.

Globally, there are several examples:

· Disney — licensing of intellectual property and characters.

· Coca-Cola — trademark and concentrate-related arrangements across its bottling network.

· Marriott/Hilton — hotel operators pay franchise and brand fees.

· McDonald’s — franchisees pay royalties for the use of the brand and operating system.

Besides the Tatas and Birlas, other Indian groups and companies that have charged brand fees include:

· Godrej: Godrej Properties historically paid 0.5% of gross turnover to Godrej Industries for the use of the Godrej trademark and logo. This practice was stopped following the 2024 Godrej family settlement.

· Muthoot Finance: Historically, it had an arrangement to pay its promoters a royalty of 1% of gross income, conditional on promoter ownership.

· Mahindra: M&M charges group companies for the use of the Mahindra name and logo, although the structure has been different from Tata’s.

· Vedanta: Significant brand fees have been paid by operating companies to Vedanta Resources, an arrangement that has also attracted considerable scrutiny.

According to Mint, Vedanta Resources’ brand-fee arrangement invited regulatory glare as group companies paid approximately $1.2 billion between FY22 and FY25. The repatriation of such a large amount to the overseas parent appears to have drawn regulatory attention.

But sometimes brand monetisation can go wrong. Here, I can recall how Amitabh Bachchan, on the advice of Kotak Mahindra, attempted to monetise his personal brand by setting up Amitabh Bachchan Corporation Ltd (ABCL).

ABCL was conceived in the mid-1990s as an ambitious attempt to corporatise and monetise the Amitabh Bachchan brand across films, television, events and entertainment. At the time, the Big B brand was valued at Rs 150 crore. ABCL expanded aggressively, and its involvement with the 1996 Miss World pageant in Bengaluru became one of its major financial setbacks. The company ran into severe financial trouble, leaving Bachchan himself facing substantial debts reportedly close to Rs 100 crore.

I can distinctly recall that Canara Bank moved the Bombay High Court seeking the attachment of Pratiksha, Big B’s famous bungalow located in Mumbai’s posh Juhu area, to recover its dues.

Fighting with his back to the wall, Big B decided to accept the Kaun Banega Crorepati offer in 2000. The rest is history. He bounced back — and how!

An important lesson from Big B’s case is that here was one of India’s most valuable personal brands who had created a corporation to monetise that brand, but, sadly, the corporation nearly financially destroyed the owner of the brand.

Ratan Tata monetised the Tata brand to strengthen an entire corporate institution; Amitabh Bachchan attempted to monetise a personal brand through a company. One created institutional cohesion and enduring brand equity; the other exposed the danger of stretching a personality brand into businesses where the underlying economics did not work.

To my mind, the Bachchan brand did not fail. The business built to monetise the Bachchan brand failed. In fact, KBC demonstrated that Brand Bachchan possessed enormous commercial value. What failed was the venture — ABCL, not Big B.