Sebi cap on royalty to benefit responsible, big cos: Bijoor

It is difficult to get consent of minority shareholders as many a time they are scattered, un-participative, no interested and at times they do not even know too much of what is happening, says Harish Bijoor, brand expert & CEO, Harish Bijoor Consults. Excerpts of interview with ETNOW.The Securities & Exchange Board of India (Sebi) has said that they will be rolling out a cap on royalty payments at 2% of the net sales. Which are the companies which will be most impacted because several big companies like Maruti, Hitachi, General Electric are used to this exercise. I believe this is going to be a positive for a lot of the bigger ones and we are really talking in terms of HUL, Procter & Gamble, possibly Maruti because fundamentally we are talking about very responsible companies. The Sebi regulation was meant to avoid the abuse of third party transactions and typically among the big companies that does not exist. Then there was a fear at a point of time about minority shareholders who are scattered, and are non-participative at times and not interested even at times. This is a good move and it does not benefit anyone too much, but at least in terms of regulation, there is a levy. You have been tracking these brands for a long time. What would have a Unilever been without the royalty payments, without the technology support, without the investments that they do in the brands globally? Similarly, what would a Nestle have done without the global brand investing into the local arm heavily?Absolutely. Bbrands are a function of two things. One is the equity that they bring to the party. Brand equity is quite an intangible asset but it belongs to someone and we live in the day and era of IP and we respect intellectual property rights. It is only right that brand royalty is paid on basis of what happens to the brand in the country which is actually using it. Second is technology and the tech fee. It is again is very important not only for companies like Unilever or but also certainly for companies in auto. For instance, there are a lot of auto companies who tend to use it. These companies without the technology interference or without the brand royalty, would be shells where one would need to invest from the scratch. So, there is an appreciation in this regulation which says that a brand is function of kind of equity and technology that is brought into the country.It is not that they are only paying the royalty, MNCs do a lot of investments as well before they launch those technologies. So, it is not that they are paying for using the brand, it is also a lot of new technology that they get from the parent.Yes, rightly so because any piece of technology that you use has taken a lot of research and development in terms of putting it together and you are getting it back out here in our country on a platter. But at the end of that meal comes a bill as well which needs to be settled. That bill is this transaction which we are talking about. They are saying that you need a shareholder nod beyond a point for companies. Shareholders in bigger companies, which have time and again benefitted from the brand and technology, be more than happy to get this approval in most cases?Mostly yes. But if it was only the approval of the entire set of shareholders that would be the easiest thing to do because you get a nod and believe it or not, most of the time the majority shareholder is the one which would give the nod easily with one stroke of pen.

from Economic Times https://ift.tt/2KMT6hC