Top 100 Indian brands could lose US$25bn from COVID-19
As the COVID-19 pandemic wreaks havoc on the global and national economy, India’s top 100 most valuable brands could lose up to 15% of brand value cumulatively, a potential drop of nearly US$25 billion compared to the original valuation date of 1st January 2020, according to the latest Brand Finance India 100 2020 report.
Looking beyond India, the value of the 500 most valuable brands in the world, ranked in the Brand Finance Global 500 2020 league table, could fall by an estimated US$1 trillion as a result of the Coronavirus outbreak.
Brand Finance has assessed the impact of COVID-19 based on the effect of the outbreak on enterprise value, compared to what it was on 1st January 2020. The likely impact on brand value was estimated for each sector. The industries have been classified into three categories – limited impact (minimal brand value loss or potential brand value growth), moderate impact (up to 10% brand value loss), and heavy impact (up to 20% brand value loss) – based on the level of brand value loss observed for each sector in the first quarter of 2020.
Tata Group breaks US$20 billion mark
Tata Group has retained its title of India’s most valuable brand by a considerable lead, recording a modest 2% brand value growth to US$20.0 billion – the first time any Indian brand has surpassed this impressive brand value marker. Tata Group is the only Indian brand to feature in the top 100 of the Brand Finance Global 500 2020 – the ranking of the world’s 500 most valuable brands.
Operating in more than 100 countries, across six continents and employing a staggering 720,000 people, Tata Group’s reach is truly global. The Group’s strategic decision to leverage the strength of its flagship operating companies is enabling the Group to fund growth across all arms of its businesses, with the ultimate aim of Tata Motors, Tata Steel, Tata Consultancy Services (TCS), its financial services and retail divisions to account for 10-15% of the Group’s profits.
Savio D’Souza, Director, Brand Finance, commented:
“The sheer size and diversity of Tata Group could mean that it emerges from the COVID-19 pandemic, relatively speaking, unscathed. Despite citing considerable difficulties in the current climate and warnings of a significant downturn in profits for some of its businesses – namely, Tata Steel and Tata Motors – the Group will hope that the stability and strength of the TCS and Tata Consumer Products Ltd brands will offset any damage to other arms of the Group.”
Reliance’s strategic industry shift pays off
Moving up one place in the ranking from 4th to 3rd following an impressive 25% brand value growth to US$7.9 billion is Reliance. Reliance’s strategic decision to shift its focus from the oil & gas sector to the retail, media and telecoms sectors have proved fruitful for the brand. The brand now claims 34% share of market revenue in the Indian telecoms sector. That being said, Reliance has not neglected its core energy business, entering solid strategic partnerships with BP in the UK and Saudi Aramco in the Middle East to support its ambitious growth plan.
Banking brands record solid growth
There are 14 banking brands in the ranking, with a cumulative brand value of US$24.9 billion, recording an average brand value growth of 25%, demonstrating the sector’s defiance against NBFC pressure and the Central Bank’s tightened monetary policy.
The State Bank of India (up 8% to US$6.4 billion) and HDFC (up 22% to US$5.9 billion) have retained their positions in the top 10, with the latter climbing one spot to 6th position in the ranking following a healthy 24% brand value growth over the previous year.
Indian banks, like many other banks across the world, have been suffering as a result of the fragile global economic and political landscape. With the banking sector in the heavy impacted bracket in our COVID-19 analysis, equating to a potential 20% brand value loss, the road ahead looks similarly rocky.
Taj is nation’s strongest
In addition to measuring overall brand value, Brand Finance also evaluates the relative strength of brands, based on factors such as marketing investment, familiarity, loyalty, staff satisfaction, and corporate reputation. Alongside revenue forecasts, brand strength is a crucial driver of brand value. According to these criteria Taj (brand value US$309 million) is India’s strongest brand with a Brand Strength Index (BSI) score of 90.5 out of 100 and a corresponding elite AAA+ brand strength rating.
The combination of the successful implementation of the brand’s 5-year plan - which focuses on selling non-core assets, becoming less ownership driven and reducing dependence on the luxury space – and the brand’ strong leadership has thrust the brand back into the Brand Finance India 100 2020 ranking, while claiming the title of the nation’s strongest brand.
The luxury hotels chain prides itself on going above and beyond to ensure world-class customer service and experience reflected in its strong brand equity scores. The brand has set its sights on expanding its global footprint wider, with 13 new properties and 2,900 rooms already in the pipeline.
Savio D’Souza, Director, Brand Finance, commented:
“COVID-19 is undoubtedly going to wreak havoc on the hotels sector in the coming year – both financially, as hotels are forced to close and bookings are cancelled, and reputationally, as brands that do not manage to avoid association with COVID-19 may suffer lasting reputational damage. Brand Finance’s analysis has shown that hotel brands could face a 20% brand value loss, following the pandemic. Taj will now, more than ever, have to rely on its elite brand strength to support it through this unprecedented time.”
Note to Editors
Every year, Brand Finance values 5,000 of the world’s biggest brands. The 100 most valuable Indian brands are included in the Brand Finance India 100 2020 report.
Brand value is understood as the net economic benefit that a brand owner would achieve by licensing the brand in the open market. Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors.
Additional insights, charts, and more information about the methodology, as well as definitions of key terms are available in the Brand Finance India 100 2020 report.
Data compiled for the Brand Finance rankings and reports are provided for the benefit of the media and are not to be used for any commercial or technical purpose without written permission from Brand Finance.
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About Brand Finance
Brand Finance is the world’s leading independent brand valuation consultancy, with offices in over 20 countries. Brand Finance bridges the gap between marketing and finance by quantifying the financial value of brands.
Brand Finance helped craft the internationally recognised standard on Brand Valuation – ISO 10668, and the recently approved standard on Brand Evaluation – ISO 20671.
Brand Finance is a chartered accountancy firm regulated by the Institute of Chartered Accountants in England and Wales (ICAEW), and also the first brand valuation consultancy to join the International Valuation Standards Council (IVSC).
Brand Finance’s brand value rankings have been certified by the Marketing Accountability Standards Board (MASB) through the Marketing Metric Audit Protocol (MMAP), the formal process for validating the relationship between marketing measurement and financial performance.
Brand Finance has assessed the impact of the COVID-19 outbreak based on the effect of the outbreak on enterprise value, compared to what it was on 1st January 2020. Based on this impact on enterprise value, Brand Finance estimated the likely impact on brand value for each sector. The industries have been classified into three categories – limited impact (0% brand value loss), moderate impact (up to 10% brand value loss), and heavy impact (up to 20% brand value loss) – based on the severity of enterprise value loss observed for the sector in the period between January and March 2020
Definition of Brand
Brand Finance helped to craft the internationally recognised standard on Brand Valuation – ISO 10668. It defines a brand as a marketing-related intangible asset including, but not limited to, names, terms, signs, symbols, logos, and designs, intended to identify goods, services or entities, creating distinctive images and associations in the minds of stakeholders, thereby generating economic benefits.
Brand strength is the efficacy of a brand’s performance on intangible measures, relative to its competitors. In order to determine the strength of a brand, we look at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance.
Each brand is assigned a Brand Strength Index (BSI) score out of 100, which feeds into the brand value calculation. Based on the score, each brand is assigned a corresponding Brand Rating up to AAA+ in a format similar to a credit rating.
Brand Valuation Approach
Brand Finance calculates the values of the brands in its league tables using the Royalty Relief approach – a brand valuation method compliant with the industry standards set in ISO 10668. It involves estimating the likely future revenues that are attributable to a brand by calculating a royalty rate that would be charged for its use, to arrive at a ‘brand value’ understood as a net economic benefit that a brand owner would achieve by licensing the brand in the open market.
The steps in this process are as follows:
1 Calculate brand strength using a balanced scorecard of metrics assessing Marketing Investment, Stakeholder Equity and Business Performance. Brand strength is expressed as a Brand Strength Index (BSI) score on a scale of 0 to 100.
2 Determine royalty range for each industry, reflecting the importance of brand to purchasing decisions. In luxury, the maximum percentage is high, in extractive industry, where goods are often commoditised, it is lower. This is done by reviewing comparable licensing agreements sourced from Brand Finance’s extensive database.
3 Calculate royalty rate. The BSI score is applied to the royalty range to arrive at a royalty rate. For example, if the royalty range in a sector is 0-5% and a brand has a BSI score of 80 out of 100, then an appropriate royalty rate for the use of this brand in the given sector will be 4%.
4 Determine brand-specific revenues by estimating a proportion of parent company revenues attributable to a brand.
5 Determine forecast revenues using a function of historic revenues, equity analyst forecasts, and economic growth rates.
6 Apply the royalty rate to the forecast revenues to derive brand revenues.
7 Brand revenues are discounted post-tax to a net present value which equals the brand value.