An elevated brand fee paid by India-listed Vedanta, aside from report dividend, has helped Vedanta Resources (VRL) — the London-based holding firm of Vedanta Group — to repay part of its debt.
Photograph: Danish Siddiqui/Reuters
Vedanta paid a brand fee of Rs 2,632 crore ($325 million) for 2022-23 (FY23), in keeping with Nomura report.
This was after the Anil Agarwal-owned holding firm raised the brand fee to 2 per cent of the turnover for its Indian companies in 2021.
In 2021-22 (FY22), Vedanta and its subsidiaries paid a brand fee of Rs 1,553 crore, in contrast with Rs 939 crore of the brand fee paid in 2020-21 (FY21).
In 2017, Vedanta signed a three-year brand licence settlement with VRL for the use of the brand ‘Vedanta’ which stipulated a brand fee to VRL at 0.75 per cent of the turnover of Vedanta.
Later, sure subsidiaries of Vedanta executed related agreements with VRL to pay brand charges ranging between 0.75 per cent and 1.5 per cent of their respective turnover.
In FY21, the settlement was renewed and sure extra providers have been additionally agreed to be supplied by VRL.
After the brand new settlement, the brand and strategic service fee was renegotiated at 2 per cent of the turnover, whereas for the remaining subsidiaries, the earlier charges remained unchanged.
In FY22, the settlement was prolonged for 15 years.
Vedanta pays such charges prematurely, at the start of the 12 months based mostly on estimated annual turnover, the corporate had stated in its annual report final 12 months.
An e-mail despatched to Vedanta didn’t elicit any response till the time of going to press.
Vedanta will not be the one firm to lift brand and royalty charges from its Indian subsidiaries.
Effective February this 12 months, Unilever Plc’s Indian subsidiary Hindustan Unilever raised royalty and central providers charges to three.45 per cent of turnover from 2.65 per cent — staggered over the following three years.
Tata Group holding firm, Tata Sons, additionally prices 0.25 per cent of the annual internet revenue or 5 per cent of the revenue earlier than tax (whichever is much less) for the use of the ‘Tata’ brand title by its subsidiaries.
The 12 months an organization makes losses, Tata Group firms should not required to pay the fee.
Analysts stated the report dividend paid by the Indian subsidiaries and the rising brand fee has helped VRL repay its debt.
Since March 31 this 12 months, VRL has diminished its gross debt by $1.4 billion to $6.4 billion, in contrast with $7.8 billion on the finish of March this 12 months.
VRL goals at decreasing debt additional in 2023-24 and in the end have it at zero.
In FY23, VRL acquired Rs 25,636 crore of dividends from Vedanta, which was partly used to repay debt, stated analysts.
VRL owns a 68.1 per cent stake in Vedanta, which, in flip, holds a 63 per cent stake in Hindustan Zinc.
VRL additionally took contemporary loans from Glencore, Trafigura, and different lenders, together with JPMorgan Chase and Oaktree, to refinance its previous loans.