Reliance Industries Ltd (RIL) will not charge any royalty to IPO-bound Jio Platforms Ltd for using the ‘Jio’ brand, departing from the common practice of promoters charging brand usage fees to operating companies.
RIL owns the Jio brand, which is used across the Mumbai-based conglomerate, from its telecom and technology arm to its financial services unit and its retail business. Jio Financial Services Ltd also does not pay any royalty for using the brand, according to JFSL annual report.
“The arrangement reflects the historical development of the ‘’ brand, which was developed through the joint efforts and investments of the promoter and the company,” Jio Platforms said in its draft red herring prospectus.
Experts have given the decision a thumbs up.
“This seems like the right decision for the right reason,” said Sanjay Kallapur, professor of accounting, Indian School of Business (ISB).
Brand royalty is a legitimate payment for services, marketing, and name recognition benefits received by the subsidiary through the use of the parent company’s brand, he said. However, pricing the brand becomes tricky because the levy must be fair to the shareholders of both companies.
While the pricing is to be done on an arm’s length basis, benchmarking is difficult as neither the parent provides nor the subsidiary acquires exactly similar services from unrelated parties, he said. With RIL and Jio deciding not to pay any royalty, it has obviated the need to price the brand, he added.
“The existence of strategic investors such as Meta and Google with substantial stakes in Jio would have been a factor in the decision,” he said.
The decision could also be seen as being in line with RIL chairperson Mukesh Ambani’s statement at the company’s 19-June annual general meeting, where he stated that despite the next generation of promoters being groomed to lead individual businesses, RIL will remain an indivisible ecosystem.
RIL did not respond to Mint’s request for a comment.
A common practice
The levy of a brand fee is a common practice among Indian conglomerates, in which promoter entities charge a fee calculated based on the operating company’s financials.
For instance, , the holding company of the Tata group, levies a brand subscription fee on all group companies. For companies that use the Tata brand directly in their name, the fee is 0.25% of their annual revenue or 5% of their pre-tax profit, whichever is lower. For companies that indirectly use the Tata brand, the levy is 0.15% of revenue.
However, Tata Sons has capped the fees at ₹200 crore since FY24. Earlier, the cap was even lower at ₹100 crore.
Tata Sons made ₹1,856 crore from brand subscription income in FY25, showed its annual report.
Vedanta Resources Ltd, the unlisted holding company of the Vedanta Group, levies a brand and strategic services fee of 0.75-3% of revenue to all its entities with no caps, according to a Vedanta Resources presentation. The fee is paid at the beginning of a fiscal year based on estimated revenue for the year. At the end of the year, any excess fee paid is returned.
Vedanta Resources earned $363 million through brand fees from group entities in FY25, showed its annual report.
The promoters of the JSW Group, meanwhile, levy a brand fee at 0.25% of its annual turnover on , subject to actual expenditure incurred towards brand development and promotion. The steel company pays a fee only when invoices are presented to it by the promoter entity.
“The type of benefits received by the subsidiary differs in different cases, so no general rule can be derived from RIL’s decision—it is not that the companies paying a royalty are doing anything wrong,” ISB’s Kallapur said.
Brand risk
The sharing of a common brand brings not just the benefit of goodwill but also the risk of collateral damage. “Any negative publicity with respect to legal or regulatory actions, product or service issues, data breaches, operational failures or other adverse developments related to the usage of the ‘Jio’ brand either by us or by other entities in the , may dilute the brand, and harm our reputation and competitive position,” Jio Platforms drove the point home in its IPO filing.
To mitigate such risks, conglomerates typically put in place rules and frameworks for all companies using the brand. For instance, besides paying the subscription fee, all companies using the Tata brand must also abide by ethical standards and a Tata Code of Conduct. Groups like Godrej and Bajaj also have similar frameworks.