Tata Sons doubles royalty fee for group firms: Here’s how much Tata Steel, TCS, Tata Motors will pay

Tata Sons, the sole proprietor of the Tata brand, has reportedly doubled the royalty fee for its group companies to ₹200 crore. This means that subsidiary companies such as Tata Consultancy Services (TCS), Tata Steel, and Tata Motors will pay double the royalty fee for using the Tata name from now on, according to a report by the Times of India.

Nearly five years after setting the fee amount at ₹100 crore, Tata Sons has doubled the fee, said the report. The parent company is also putting more focus on enhancing its brand name, visible when the brand bought the title sponsorship of IPL. In its communication to shareholders, TCS stated that it made a royalty payment of ₹200 crore to Tata Sons during the fiscal year 2024.

Also Read: Tata Motors Q4 Results: Net profit jumps over 3-folds on robust demand, JLR revenue up 11% YoY; 5 key highlights

Tata Sons chairman Ratan Tata 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 five 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 ₹1,008 crore in brand subscription income. In 2015, Tata Sons, then led by Cyrus Mistry, set a ceiling of ₹75 crore for the maximum brand subscription fee. Later, current chairman N Chandrasekaran raised this limit by 33 per cent. TCS paid ₹100 crore each to Tata Sons for the fiscal years 2022 and 2023, the report stated.

In addition to increasing the upper limit to ₹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 ₹200 crore, according to the report.

Earlier today, Tata Motors announced its January-March quarter results for fiscal 2023-24 (Q4FY24), reporting a surge of 222 per cent to ₹17,407.2 crore, compared to ₹5,407 crore in the corresponding period last year.

India's most valuable carmaker beat D-Street estimates as it reported a more than three-fold increase in net profit driven by a tax credit surge as well as strong performance across all its three auto businesses, especially its British luxury car unit, Jaguar Land Rover (JLR).