 "Here's how much royalty Tata Group companies will pay for the Tata name")
Tata Sons has increased the royalty fee — which its operating companies pay — to Rs 200 crore, effectively doubling it. Entities such as Tata Consultancy Services (TCS), Tata Steel, and Tata Motors pay this fee for the privilege of using the "Tata" name, according to a report in the Times of India (TOI).
Five years after fixing the royalty fee at Rs 100 crore, Tata Sons, the owner of the Tata brand, has now doubled the fee. In its communication to shareholders, TCS stated it made a royalty payment of Rs 200 crore to Tata Sons during the fiscal year 2024.
Ratan Tata, the chairman emeritus of Tata Sons, introduced the brand subscription scheme in 1996. This scheme mandated that a group company using the Tata name directly would contribute either 0.25 per cent of its annual revenue or 5 per cent of its pre-tax profit, whichever was lower. On the other hand, a group entity employing the Tata name indirectly would be required to pay 0.15 per cent of its annual revenue, the report said.
The brand subscription fee represents one of Tata Sons' revenue streams. In fiscal year 2023, it generated Rs 1,008 crore in brand subscription income.
In 2015, Tata Sons, then led by Cyrus Mistry, set a ceiling of Rs 75 crore for the maximum brand subscription fee. Later, current chairman N Chandrasekaran raised this limit by 33 per cent. TCS paid Rs 100 crore each to Tata Sons for the fiscal years 2022 and 2023, the report stated.
According to a source cited by the report, in addition to increasing the upper limit to Rs 200 crore, Tata Sons has eliminated the fee tied to a company's pre-tax profit, which implies that operating entities are now required to pay 0.25 per cent of their annual revenue, with the maximum fee capped at Rs 200 crore.
The report said Tata Sons reported a 23 per cent increase in brand subscription income in FY23, compared to FY22, rising from Rs 820 crore to Rs 1,008 crore. The holding company uses the brand subscription fund to both promote and safeguard the Tata brand, valued at $29 billion (approximately Rs 2.4 trillion), according to the international consultancy firm Brand Finance.