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Earning power of Indian vs. foreign brands
Wed, 22 Jun Pre-Open

Indian bellwethers like Infosys, Tata group and L&T recently made news topping global titans like Google and Apple in terms of brand strength in India. The fact that the former had an upper hand due to their local incorporation cannot be ignored. Also that in times of uncertainly companies that have a very long history of brand building win brownie points is well accepted. The likes of SBI and LIC that have also found a place in the list have decades of existence to piggy back on.

But does the earning power of these brands make them lucrative investment targets? The likes of Buffett are known to be followers and investors into brands that consumers are addicted to. Be it Coca Cola, American Express or Gillette. So much so that in most of these cases the brand value of the companies are as much as 20% of their market cap. With the exception of Munich Reinsurance, Sanofi Aventis, US Bancorp etc. most of Buffett's investments fall within the list of top 500 Global Brands. This even includes his investments in Chinese company BYD and South Korean Posco.

According to Brand Finance, the brand value of the Tata group has doubled in the past 3 years positioning it amongst the top 50 globally. In addition to better geographical presence and higher profitability, the fact that the earning power of Tata's brand has improved adds merit to its high brand value.

So, why are companies like Google and Apple that are growing at break neck speed less favoured? The only answer that we have is relative uncertainty about long term prospects. While the likes of Google and Apple currently have sufficient brand value to boast of, their ranking could be paling in India on two counts. The relative unfamiliarity amongst Indian masses and the fast changing nature of technology.

Thus investing in brands is certainly a good approach. However, it would be advisable to look at the long term sustainability of the brand value before arriving at an investment decision.

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Feb 23, 2018 (Close)