Brand valuation: Valuation of key cigarette trademarks of The Indian Tobacco Division, ITC limited.

Abstract

A brand is a name, symbol, design or mark that enhances the value of a product beyond its functional purpose, with the incremental cash flow associated with this enhanced value being defined as the brand's “value”. Until recently the awareness of a brands's importance was qualitative as not much correlation could be established between the existing brand support investment and the returns generated thereof. A spate of mergers and acquisitions in the eighties opened the floodgates to the monetarization of the Brand. Though initiated as a measure to boost the company’s balance sheet ,the current interest in brand valuation stems as much from the brand management perspective as from the financial one . The former is justifiable. Escalating costs of developing and maintaining new brands has led to increased realization that " the established brand" is the most capital asset of any firm . This fact is aptly reflected in the prevalent use of brand extensions . Also, there is widespread concern that the pressure to deliver short term results is leading to a misdirected focus on the brand thereby reducing its long run value . A major obstacle in abandoning this short term outlook is the difficulty of measuring the impact of brand * : investments on the long term performance of the brand . Brand value correctly and objectively measured could be an appropriate metric for this . It is this Brand management perspective that has guided us through this valuation exercise .