Coronavirus impact: Top Indian firms likely to lose $25 billion of brand value, says Brand Finance report

The 100 most valuable Indian firms may lose $25 billion of brand value due to the Coronavirus (COVID-19) outbreak, according to a Brand Finance report.

The most valued 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 January 1, 2020, according to the latest 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.

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.

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.

Globally, the Brand Finance Global 500 2020 league table showed that the value of 500 most valued brands in the world could fall by an estimated $1 trillion as a result of COVID-19. Among Indian companies, Tata Group is the only company to feature in the Top 100 of the global 500 list.

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 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). This was based on the level of brand value loss observed for each sector in the first quarter of 2020.

Tata Group breaks $20 billion mark

When it comes to the Tata Group, the report said that this is the first time any Indian brand has surpassed the $20 billion mark.

The report added that the Group’s strategic decision to leverage the strength of its flagship operating companies is enabling its fund growth across all arms of its businesses, with the ultimate aim of Tata Motors, Tata Steel, Tata Consultancy Services (TCS), its financial services and retail divisions to account for 10-15 percent of the Group’s profits.

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

“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 added.

Reliance Industries’ strategic industry shift pays off

The report said that Reliance’s strategic decision to shift its focus from the oil & 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 also added that RIL has not neglected its core energy business, entering strategic partnerships with BP in the UK and Saudi Aramco in the Middle East to support its growth plan.

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.

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. HDFC Bank climbed one spot to sixth position in the ranking following a 24 percent brand value growth over the previous year.

Taj is India’s strongest brand

In addition to measuring overall brand value, Brand Finance also evaluated 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 report said that this is a result of Taj’s five-year plan, which focuses on selling non-core assets, becoming less ownership driven and reducing dependence on the luxury space.

As per the report, Taj has set its sights on expanding its global footprint wider, with 13 new properties and 2,900 rooms already in the pipeline.

D’Souza said that COVID-19 is going to wreak havoc on the hotels sector in the coming year as hotels are forced to close and bookings are cancelled

He added that Brand Finance’s analysis has shown that hotel brands could face a 20 percent brand value loss, following the pandemic.

“Taj will now, more than ever, have to rely on its elite brand strength to support it through this unprecedented time,” he said.

Find the full Brand Finance India 100 2020 Report here.

Read our entire coverage on India' Most Valuable Brands 2020 here.

Disclaimer: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd which publishes Moneycontrol.