TCS, Tata Steel and Tata Motors, among others, are will reportedly have to pay double the royalty fees they pay to holding firm Tata Sons.

What Happened: Companies using the Tata brand are obligated to remit royalties to Tata Sons, the custodian of the Tata brand, the Times of India reported. Tata Sons has doubled the royalty fee to ₹200 crore.

Tata Sons opted to raise the fee after maintaining it at ₹100 crore for five years, effectively doubling it. Simultaneously, the corporation, which oversees the Tata Group, is ramping up efforts to boost its brand recognition. This includes initiatives like its sponsorship of the Indian Premier League (IPL).

In a shareholder communication, TCS disclosed paying Tata Sons a royalty of ₹200 crore during the fiscal year 2024.

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Long History: The brand subscription scheme, spearheaded by Ratan Tata, the chairman emeritus of Tata Sons, was instituted in 1996. Under this framework, a Tata Group entity directly utilising the Tata name was obliged to remit either 0.25% of its annual revenue or 5% of its pre-tax profit, whichever was lower. Meanwhile, an entity indirectly using the Tata name must pay 0.15% of its annual revenue.

In 2015, during the tenure of the late Cyrus Mistry, Tata Sons capped the brand subscription fee at ₹75 crore. This cap was subsequently raised by 33% under the stewardship of the current chairman, N Chandrasekaran. In fiscal years 2023 and 2022, TCS disbursed ₹100 crore each to Tata Sons as part of this subscription fee.

Tata Sons eliminated the fee based on a company’s pre-tax profit, sources told the daily. Instead, operating entities are now mandated to remit 0.25% of their annual revenue, with the maximum fee capped at ₹200 crore.

One of Tata Sons’ revenue streams is the brand subscription fee. In fiscal year 2023, it amassed ₹1,008 crore in income from brand subscriptions.

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