Relief 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.
The idea behind relief-from-royalty is simple enough to state in a sentence.
If you did not own this brand, you would have to licence it from somebody. What you save by owning it is what it is worth.
Everything else is working out the royalty rate, the revenue it applies to, and how long the saving lasts.
Value = the after-tax royalty a licensee would pay, applied to forecast revenue, discounted to present value. The royalty rate is the contested input — take it from the debtor's own franchise agreements where they exist, and benchmark it where they do not. The method fits franchised and licensed businesses best.
The mechanics
Five steps:
1. Forecast the revenue the brand supports. Not group revenue — the revenue attributable to products or outlets carrying the brand.
2. Determine the royalty rate a willing licensee would pay for the right to use it.
3. Apply the rate to the forecast revenue to get the notional royalty saved each year.
4. Tax-effect it. The saving is a pre-tax saving; what accrues to the owner is after tax.
5. Discount to present value over the brand's remaining economic life, at a rate reflecting the risk of those revenues.
The output is the value of the brand as a separable asset — which is exactly what a CIRP needs, because the question in a resolution is what somebody would pay for the name.
Where the royalty rate comes from
This is the input that decides the answer, and in an insolvency there is often a better source than benchmarking.
From the debtor's own agreements. A franchised business already charges a royalty. That rate is not hypothetical — it is contracted, and it has been accepted by hundreds of counterparties in an arm's length market. It is the strongest evidence available and should be the starting point. Brand and franchise valuation →
From comparable licence transactions, where the debtor licenses nothing. Sector databases and published agreements give ranges, but the comparability question is real — a rate for a global consumer brand tells you little about a regional one.
From a profit-split sense check. Whatever rate is chosen, test it against the licensee's margin. A royalty that leaves a licensee with no profit is not a rate anybody would pay, and a valuation resting on it is not credible.
Ranges, not points. Where the rate is uncertain — which it usually is — present a range and run the sensitivity. The CoC is better served by "₹40–55 crore, driven mainly by the royalty rate" than by a single number with a hidden assumption. Assumptions and sensitivity →
The insolvency adjustments
Applying the method unmodified to a distressed debtor overstates the answer. Four adjustments:
Revenue forecast must reflect the distress. Franchisees leaving, outlets closing, supply disruption. The historical revenue line is not the forecast.
Remaining economic life is not indefinite. Registrations expire and need renewal. Where renewals have lapsed during the distress, that is a real constraint on the asset.
The discount rate carries CIRP risk. These are not stable cash flows.
Separate the temporary hit from permanent impairment. The insolvency depresses brand perception now; the question is how much of that recovers under new ownership with fresh capital. Getting this wrong in either direction is the central judgment in the exercise, and it belongs in the report as reasoning, not as a rate. Intangibles under IBC →
When to use something else
| Situation | Better method |
|---|---|
| No licensing, no comparables, no forecast | Cost approach — as a labelled fallback |
| Operating business, earnings attributable to the brand isolable | Excess earnings |
| Genuine comparable brand sales exist | Market approach — strongest where truly comparable |
| Brand inseparable from the operating business | Value the enterprise, not the brand separately |
The last row matters for liquidation value. Relief-from-royalty inherently assumes the brand can be licensed separately — which is the same question as whether it is independently transferable, and therefore whether it has liquidation value at all. Fair value vs liquidation value →
Key takeaways
- Value = after-tax royalty saved, discounted.
- Use the debtor's own contracted royalty rate where the business is franchised.
- Sense-check the rate against licensee margin. An unaffordable rate is not a rate.
- Present a range and the sensitivity, not a single number.
- Adjust the forecast for distress — historical revenue is not the base case.
- Check registration renewals. Lapsed marks constrain economic life.
- The method assumes separability, which is also the liquidation-value test.
Read next
- Valuation of Intangible Assets Under IBC
- Brand and Franchise Valuation in Asset-Light CIRP
- Securities and Financial Assets Valuation Under IBC
- Assumptions and Sensitivity Analysis in a Valuation Report
Disclaimer: Positions stated as on 5 September 2026. General guidance on method only — brand valuation is highly fact-specific.