The Rs 4,800-crore GMR Group has started talks with global brand valuation giants Brand Finance, to value the intangible assets of the group which includes its brand, its reputation capital, its relationship with stakeholders and its talent pool, even as it is sharpening its overseas focus.
The brand evaluation is considered critical because investors are increasingly looking at valuations of such intangible assets before taking a call on investing in a company. The value of intangible assets varies but could account for 38 to 46 per cent of a group’s enterprise value, of which market capitalisation is just one element.
Speaking to Business Standard P M Kumar, executive director, group corporate development for the GMR Group, said, “We are embarking upon the exercise to value our intangible assets like brand, reputation and talent amongst others. Our strategy is to get into market and consumer-facing businesses and this is reflected in all our businesses that we are in.”
So, for instance, airport infrastructure (it has built the new airport at Hyderabad and is expanding Delhi) connects the group with consumers who fly, building highways will connect them with toll-paying consumers, and even the cricket team (it owns the Indian Premier League team Delhi Daredevils) relates to consumer loyalty.
THE UK-based Brand Finance had been hired in India by the Godrej group to value its brand earlier. In its latest report on top 500 Global brands, Brand Finance has rated the Tata group at number 51, with a brand value of $11.79 billion. It is the only Indian brand in the list.
Meanwhile, in a fundamental shift in strategy, GMR has also targeted 30 to 35 per cent of its turnover and assets in the next four years to come from global businesses and acquisitions. Turnover from international operations is minimal (around Rs 300 crore from airport operations in Turkey), GMR executives said, but is expected to hit over Rs 10,000 crore in the next four years. The group’s asset base is also expected to double to Rs 20,000 crore by then. In the airport services business, the company is scouting for privatisation contracts in Europe.
In the power sector, it is looking for acquisitions in West Asia and Europe.
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The group has already won the contract for the expansion of the Sabiha Gokcen airport in Istanbul, Turkey. It also recently bought 50 per cent in Netherland-based power company Intergen, which operates eight power plants in six continents. The company, which currently generates 8,000 Mw of power, is also working on projects that will generate another 6,000 Mw. GMR has also acquired 100 per cent stake in Island Power in Singapore, which will generate 800 Mw of power .
...To rotate family members
Concerned about family disputes breaking out, the group has institutionalised a rotation policy for family members who oversee various businesses.
Under this policy, a family member who chairs a division is rotated to another business after three years.
The group, for instance, had already implemented the policy when Srinivasa Bommidala, the son-in-law of group chairman G M Rao was shifted to urban infrastructure after a stint in airport infrastructure a year and a half ago. Rao’s son, Kiran Grandhi, has taken over from his brother-in-law in the airport business.
“The whole idea is that no one develops ownership over a business. So, for instance, airport business might be high profile while highways might not be, but everyone should have a chance to manage both,” said P M Kumar, executive director, group corporate development.