The 30,000-crore finance to real estate Shriram group and Muthoot Finance have decided to

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follow the example of the Tata group and Kishore Biyani-led Future group, to charge member companies for use of the group name and logo.

BSE-listed Muthoot Finance has proposed to pay its promoters led by chairman MG George Muthoot annual royalty equivalent to one per cent of the gross income of the company subject to a maximum of three per cent of profit before tax (after charging royalty) and managerial remuneration. The royalty will be in lieu of a non-exclusive license to use the Muthoot trademarks whose ownership is being transferred from the company to promoters vide an application filed in September 2010 before the trademarks registry Chennai.

Hoshedar K Press, an independent consumer consultant said, “Parent firms charge royalty to their group companies for the benefits and goodwill they enjoy.”

Like the Muthoot group, the Shriram group too charges constituent firms a fee for using the brand name Shriram. At present firms such as Shriram City Union Finance and Shriram Transport Finance Company pay 0.25 per cent of gross turnover for use of the brand and associated mark. In addition the firms also reimburse Shriram Ownership Trust, actual expenses in respect of protection and defence of the copyright. Shripad Nadkarni, director at MarketGate Consulting said, “The company wants to centralise services and charge royalty to its group companies for it.”

“The sum being collected so far as royalty is small and is quite insignificant as compared to the sum collected by Tata Sons for instance. The trusts responsibility is to create an image for the group, project the appropriate image to the external world and harness the synergies between different group companies,” said R Thyagarajan, founder of the Shriram group.

The move by Muthoot’s promoters and the Shriram group to charge its companies for use of the brand and logo follows on the heels of Biyani’s Future Ventures paying an annual royalty as part of the master license agreement for use of the Future group name, logo and trademarks subject to brand usage guidelines specified. The NSE-listed Future Ventures has agreed to pay royalty at an increasing rate of Rs 100 lakh for the financial year 2011 going up to Rs 244 lakh in the fiscal year 2015. The fees are to be paid to Future Ideas Company - a promoter group entity on a quarterly basis. In addition, the Biyani-controlled firm has agreed to pay additional royalty at the rate of 0.1 per cent of its total turnover. However, the fixed royalty already paid, will be subtracted from the amount payable as per the turnover formula, to determine the sum of additional royalty if any, payable.

At the $67.4 billion Tata group, the Tata Brand Equity and Business Promotion Agreement (BEBP) codifies the usage of the Tata logo and name. Under the deal eligible group companies pay between 0.1-0.25 per cent of turnover (not exceeding 5 per cent of net profit).