Royal Enfield’s brand value – almost doubled this year

20 July 2016
This article is more than 4 years old.

· Tata’s brand value has decreased by 11% to a value of US$13.7 billion

· Royal Enfield grew 91% in brand value to US$519 million

· Infosys experiences over 110% growth in two years from renewed leadership

· Adani Enterprises drops to 60th place after falling 64% in brand value

Every year, leading brand valuation and strategy consultancy, Brand Finance, puts thousands of the world’s top brands to the test. They are evaluated to determine which are the most powerful and the most valuable by country, by industry and against all other brands worldwide. India’s 100 most valuable brands, which have a combined total value of US$120 billion, are ranked in the Brand Finance India 100.

Tata remains the country’s most valuable brand this year, with a brand value of US$13.7 billion despite an 11% decrease. Tata’s revenue in the first three quarters of the financial year fell 11%. The current state of vulnerability the steel industry faces as a result of an oversupply has created instability and Tata falls prey to the volatility. The oversupply has largely been caused by a surge in exports from Chinese steelmakers responding to decreasing demand in their own country.

The UK market has been particularly badly affected and the conglomerate announced plans to sell its UK steel operation in March which caused considerable panic as around 40,000 UK jobs are thought to rely on the business. A partial recovery in the steel price, the pound’s plunge on currency markets after Brexit and the UK government’s promised package of support have caused a re-think, although doubts remain over the long-term profitability of the UK plants, which have experienced persistent losses in recent years.

Royal Enfield is India’s fastest growing brand in the table this year, rising a hugely impressive 91% in brand value to US$519 million. The motorcycle manufacturing company owned by Eicher Motors enjoyed a 36% rise in sales in June 2016, on a year-on-year basis while exports rose a huge 118%. Royal Enfield has “created a niche for itself” over the years, a recent report on the company by JP Morgan stated. Their dominance in India has been matched by soaring exports with high performing stores across Asia, Europe and North America and Royal Enfield even overtook Harley-Davidson in 2014 in terms of global sales. This success has continued with its nifty range of smaller capacity models offering a lower cost option to customers. Schemes such as Road Side Assistance offered with every new motorcycle in India also aid the brand’s customer-caring image.

Of the top 25 ranked brands, Airtel, India’s top telecom service provider has increased 28% in brand value to US$5.77 billion after recently launching ‘Happy Hours’ which allows pre-paid customers to get 50% of data back for all in-app content downloads scheduled between 3:00 am and 5:00 am. Mahindra Group increased 37% in brand value to US$2.95 billion whilst HDFC Bank, Idea Cellular and Amul moved up to 14th, 15th and 16thin the table respectively.

Infosys, providing business consulting, information technology and outsourcing services, also had an excellent year, rising from 7th to 5th with a brand value of US$4.79 billion, which equates to a 40% increase from last year. Renewed leadership and ambitious goalposts set for value creation has led to over 110% in brand growth over the past two years.

After recently striking a deal to buy Jaypee Group’s cement assets, UltraTech rose 15% in brand value to US$932 million whilst Kotak Mahindra Bank and Hero Motors moved towards the top 25 with 54% and 9% increases respectively.

Brand Finance India’s country head, Ajimon Francis, stated, “Brand India’s story is strengthening. There is an emergence of new age brands from E-Commerce, IT Services and Banks, and the new players emphasise India’s continual growth”.

Yes Bank, India’s fifth largest private sector bank has signed an agreement with SIDBI to finance Energy Efficiency Projects program as their brand value surges 68% to US$342 million and sees them move up 26 places to 73rd. Jet Airways’ brand value is also on the rise as a 21% increase has seen them break the US$400 million threshold at US$405 million.

Skin care and health care company, Emami, low-cost airline, Indigo, and electrical equipment company, Havells, have all had excellent years as they make the top 100 for the first time.

Conversely, mining and energy giant Adani Enterprises is the worst performing brand in the table this year, decreasing 64% in brand value to US$417 million and dropping from 26th place in 2015 to 60th this year. The company, started by self-made billionaire Gautam Adani almost thirty years ago, is the largest trading house of India in importing coal with a market share of 60%. However, international coal prices have reached record lows this year and further falls are predicted as the commodity faces growing competition form renewables and many of the largest economies look to more environmentally friendly options. Adani’s US$10 billion controversial Carmichael mine, rail and port project in Queensland also now looks under serious threat after facing long delays due to legal challenges from environmental groups and a lack of investors due to the plunge in coal prices.

Big Gains in India Top 100

1. Top 25 ranks

a. Airtel

b. M&M

c. Idea

d. HDFC

e. Amul

2. 26 to 50 ranks

a. Kotak

b. Ultratech

c. Hero Motors

3. 51 to 75 ranks

a. JSW

b. IndusInd bank

c. Yes Bank

d. Jet Airways

4. 76 to 100 ranks

a. Emami

b. Indigo

c. Havells

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Florina Cormack-Loyd
Florina Cormack-Loyd
Senior Communications Manager
Brand Finance

About Brand Finance

Brand Finance is the world’s leading brand valuation consultancy. Bridging the gap between marketing and finance, Brand Finance evaluates the strength of brands and quantifies their financial value to help organisations of all kinds make strategic decisions.

Headquartered in London, Brand Finance has offices in over 20 countries, offering services on all continents. Every year, Brand Finance conducts more than 5,000 brand valuations, supported by original market research, and publishes nearly 100 reports which rank brands across all sectors and countries.

Brand Finance is a regulated accountancy firm, leading the standardisation of the brand valuation industry. Brand Finance was the first to be certified by independent auditors as compliant with both ISO 10668 and ISO 20671, and has received the official endorsement of the Marketing Accountability Standards Board (MASB) in the United States.

Methodology

Definition of Brand

Brand is defined 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

Brand strength is the efficacy of a brand’s performance on intangible measures relative to its competitors. Brand Finance evaluates brand strength in a process compliant with ISO 20671, looking at Marketing Investment, Stakeholder Equity, and the impact of those on Business Performance. The data used is derived from Brand Finance’s proprietary market research programme and from publicly available sources.

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 brands in its rankings 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, while 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 Discount post-tax brand revenues to a net present value which equals the brand value.

Disclaimer

Brand Finance has produced this study with an independent and unbiased analysis. The values derived and opinions presented in this study are based on publicly available information and certain assumptions that Brand Finance used where such data was deficient or unclear. Brand Finance accepts no responsibility and will not be liable in the event that the publicly available information relied upon is subsequently found to be inaccurate. The opinions and financial analysis expressed in the study are not to be construed as providing investment or business advice. Brand Finance does not intend the study to be relied upon for any reason and excludes all liability to any body, government, or organisation.

The data presented in this study form part of Brand Finance's proprietary database, are provided for the benefit of the media, and are not to be used in part or in full for any commercial or technical purpose without written permission from Brand Finance.