Brand Valuation explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Two valuers, one brand, a 96 per cent gap — and then a sale process that attracted no bids at any price.
What a brand is
The term 'brand' refers to names, signs, symbols, colours, logos etc. that help customers to identify goods, services, or companies. It is something that a consumer associates itself with and considers as a promise by the brand that they will conform to the expectations they have created in the minds of their customers.
Hence, Brands are the interface between a business and its customers. Brand Value is the monetary worth of the Brand if it was sold and represents financial value attributable to the brand equity for a given purpose.
The three numbers
| Date | Assessment | Context |
|---|---|---|
| 2008 | INR 4,100 crore | Market leader with more than 30% market share; used as the single largest collateral for bank loans |
| On default | INR 160 crore | Second valuer appointed by lenders — less than 95% of the original |
| April 2014 | No takers | SBICAP Trustee called for expressions of interest; no airline came forward |
The trademarks offered included "fly kingfisher" (label), "fly kingfisher", "flying models", "fly the good times", "fun liner", "kingfisher" and "flying bird device".
The case makes the fair point in the valuer's defence: valuation is done as on a particular date and is based on the circumstances existing as on the date of Valuation. Further, valuation is an opinion that a Valuer express based on his professional judgement and on a hindsight, everyone can be an expert and question the projections and valuation, but as on the date of valuation, no one can project the future accurately.
That is correct as far as it goes. In 2008 the airline had over 30 per cent share, a five-star rating and the widest network in the country. Nobody knew what 2012 held.
But the case does not stop there: having said that, it is also important that a valuer carry out sufficient analyses and evaluation to justify his assumptions and projections — and it then quotes ICAI Valuation Standard 201, paragraphs 26 to 28, on analyses and evaluation.
Applied here, the gap is identified precisely. The valuer considered the Market Share of the company that was generated in a short time, preference of the brand over the nearest competitor and its ability to command premium over competition and the perception and the hype around the brand and its promoters.
What was not considered: the ability of the brand to consistently command premium and ability to perform in case of Disruption.
Note that this is not hindsight. The company was loss-making in 2008 and had been since inception — that was knowable on the valuation date. A brand valuation that capitalises a premium the business has never converted into profit is not defeated by later events; it was untested when it was made.
The final data point settles the question. When the marks were actually offered for sale, the market's answer was zero — not 4,100 crore, not 160 crore.
ICAI Valuation Standard 201, paragraphs 26-28
"26. The extent of analyses to be carried out by the valuer in relation to the engagement shall be based on the purpose of the valuation assignment and the terms of engagement.
27. The judgments made by the valuer during the course of assignment, including the sufficiency of the data made available to meet the purpose of the valuation, must be adequately supported.
28. The valuer shall carry out relevant analyses and evaluations through discussions, inspections, survey, calculations and such other means as may be applicable and available to that effect."
Paragraph 26 ties the depth of work to the purpose. A brand valuation supporting the single largest collateral for a bank consortium demands more analysis than one prepared for internal management information — the same principle as the Standard's first significant consideration, to determine the purpose and objective of the overall valuation assignment.
The investigation
Questions were raised on the Brand Valuation Methodologies used and how the brand can be valued at such a whopping amount when the company had been making losses since its inception. The Serious Fraud Investigation Office (SFIO), which comes under the purview of the Ministry of Corporate Affairs, started investigating the INR 4,100 crore valuation attached by the Valuers to the Kingfisher Airlines brand.
Common mistakes in a brand valuation
- Capitalising a price premium the business has never converted into profit.
- Treating market share and media perception as the value drivers.
- Not testing the brand's performance under disruption.
- Scaling the depth of analysis to the fee rather than to the purpose.