India's most valuable companies likely to lose $25 bn of brand value as COVID-19 pandemic wreak havoc: Brand Finance report

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 1 January 2020

FP Staff June 01, 2020 11:05:23 IST
India's most valuable companies likely to lose $25 bn of brand value as COVID-19 pandemic wreak havoc: Brand Finance report

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 percent of brand value cumulatively, a potential drop of nearly $25 billion compared to the original valuation date of 1 January 2020, according to according to Brand Finance India 100 2020 report.

As per the 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.

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 1 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 percent brand value loss), and heavy impact (up to 20 percent brand value loss) – based on the level of brand value loss observed for each sector in the first quarter of 2020.

Among the companies, Tata Group retained the title of India’s most valuable brand, breaking the $20 billion brand value mark for first time and showing a 2.3 percent growth. The report said that luxury hotel chain Taj (also a Tata Group company) was the country’s strongest brand. 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.

The sheer size and diversity of Tata Group could mean that it emerges from the COVID-19 pandemic, relatively speaking, unscathed, said Savio D'Souza, Valuation Director, Brand Finance. "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," he said.

Indias most valuable companies likely to lose 25 bn of brand value as COVID19 pandemic wreak havoc Brand Finance report

The country’s largest insurer Life Insurance Corporation of India (LIC) grabbed the second spot with a 10.7 percent growth in brand value at $8.1 billion. Reliance Industries took the third spot with a 25.2 percent growth in brand value at $7.9 billion. Reliance’s strategic decision to shift its focus from the oil and gas sector to the retail, media and telecoms sectors have proved fruitful for the brand. The brand now claims 34 percent share of market revenue in the Indian telecoms sector, the report said. 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, the report said.

Banking brands record solid growth

There are 14 banking brands in the ranking, with a cumulative brand value of $24.9 billion, recording an average brand value growth of 25 percent, demonstrating the sector’s defiance against NBFC pressure and the Central Bank’s tightened monetary policy.

The State Bank of India (up 8 percent to $6.4 billion) and HDFC (up 22 percent to $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 percent 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 the report's COVID-19 analysis, equating to a potential 20 percent brand value loss, the road ahead looks similarly rocky, it said.

Taj is country's strongest brand

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 $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 ranking, while claiming the title of the nation’s strongest brand. The brand has set its sights on expanding its
global footprint wider, with 13 new properties and 2,900 rooms already in the pipeline.

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