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May 10, 2002 | 1340 IST
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Infosys brand value up 35%

K Giriprakash

Infosys Technologies has recorded a 35 per cent increase in the value of its brand to Rs 72.57 billion as of March 31, 2002. But its market capitalisation was down by 8 per cent to Rs 246.54 billion. Hence, the value of the Infosys brand was around 29 per cent of its market capitalisation.

Last year, the situation was worse. The value of the Infosys brand had increased by a mere Rs 1.30 billion to Rs 53.76 billion. Its market capitalisation had declined by 55 per cent to Rs 269.26 billion.

The most valuable intangible asset of Infosys is its client base. Its marque clients contributed around 56 per cent of the revenue during 2001-02, compared to 52 per cent during 2000-01.

"This gives stability to revenues and also reduces marketing costs," the firm's annual report said. Marque clients are those who enhance the company's market-worthiness. They are often called reference clients.

Infosys adopted the generic brand earnings-multiple model to value its corporate brand. The concept finds mention in "Valuation of trademarks and brand names" by Michael Birkin in Brand Valuation, edited by Joh Murphy.

Infosys said it had used various models for evaluating assets off the balance sheet. This was to bring certain advances in financial reporting.

The brand earnings-multiple-model based its valuation on the following assumptions, among others: revenue excluding "other income", annual inflation at 6 per cent, 5 per cent of the average capital employed and the tax rate at 36.75 per cent.

"This exercise helps the management to understand the components of goodwill. The aim is to lead the debate on the balance sheet," a company statement said.

Goodwill is an accounting concept, defined as the premium paid to the tangible assets of a company. It is an overarching idea that transcends concepts like brand equity and human resources.

Corporate attributes like core competence, market leadership, brands, superior earning power, and excellence in management, were built into this concept, the annual report mentioned.

It said the brand was a "trustmark", a promise of quality and authenticity. Brand equity is value addition to a product or a company by its brand name. According to the report, "It is the financial premium that a buyer pays for a brand."

Interbrand, a brand consultancy firm, had valued Coca-Cola as the most valued brand in the world in 2001 at $68.9 billion, when its market capitalisation was $117.2 billion. Hence, the brand valuation of the firm was around 59 per cent of its market capitalisation.

Out of the 74 brands Interbrand assessed in 2000, less than half showed a gain in value in 2001. Microsoft, IBM, Intel and Nokia were part of the world's 10 most valuable brands in 2001.

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