A study by Business Standard Research Bureau shows that 38 companies within the Tata group reported a net sales of Rs 25,265 crore and net profit of Rs 2,591 crore during the year ended March 1996.
Had the royalty fee come into force last year, these clutches of companies would have forked out Rs 52.29 crore based on March 1996 net sales earnings.
With net sales and net profit expected to go up in 1996-97, the total royalty payout for the Tata companies to Tata Sons will obviously go up from Rs 52 crore and may touch the Rs 60-crore mark, according to a conservative estimate.
As per the new dispensation being mooted by chairman Ratan Tata, each company within the Tata group will have to pay royalty fee to Tata Sons for using the Tata brand name.
In the new scheme of things, the group has been divided into three tier for levying turnover-based graded royalty.
The companies which have incorporated Tata in their name will pay 0.25 per cent of their net turnover or five per cent of their net profit- whichever is lower- from 1996-97.
The second category of companies -- those which leverage the Tata name to market their products -- will pay 0.15 per cent royalty, while the third group- deemed as group members- will pay royalty of 0.10 per cent of the net sales income.
Based on this grouping, 19 companies fall under "A" group category and they will shell out Rs 42.40 crore to Tata Sons.
The royalty from B category companies will fetch Rs 9 crore, while C category companies will have to shell out about Rs 1 crore from their net profit for the current year. Telco, with net sales of Rs 6,932.15 crore for the year 1995-96, will pay royalty fee of Rs 17.33 crore, while Tata Steel, with net sales of Rs 5,261.51 crore, will have to pay Rs 13.15 crore. They will be followed by Tata Chemicals Rs 3.51 crore, ACC Rs 3.02 crore and Tata Power Rs 2.88 crore.
The impact of royalty on EPS of these companies will range from Rs 0.70 (Tata Engineering) and Rs 0.02 (Hitech Drilling).
Tata Sons, in turn, is expected to use these resources to strengthen and promote the Tata brand name, both within the country and abroad.
Besides, it is also expected to shore up its the holding in all Tata companies over a period of time and insulating the group from a takeover threat.
