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Vishwanth Kulkarni

BANGALORE May 20

THE `Infosys' brand appreciated by mere three per cent during fiscal 2003 to Rs 7,488 crore, as against a whopping increase of 35 per cent recorded during fiscal 2002, over the previous year.

However, the company's market capitalisation recorded a positive growth of nine per cent during fiscal 2003 to Rs 26,847 crore as against a negative growth in fiscal 2002 over previous year. The value of Infosys brand was 27.89 per cent of its market cap during fiscal 2003.

The Infosys brand value stood at Rs 7,257 crore during fiscal 2002 as against Rs 5,376 crore in fiscal 2001. Its market capitalisation as on March 31, 2002 was Rs 24,654 crore as compared to Rs 26,926 crore as on March 31, 2001.

Infosys had adopted the generic brand earnings-multiple model to value its corporate brand, the company said in its annual report filed with the Securities and Exchange Commission. The concept finds mention in Valuation of Trademarks and Brand Names by Mr Michael Birkin in Brand Valuation, edited by Mr John Murphy.

Using the brand earnings-multiple model, Infosys based its valuation on the following assumptions, among others the total revenues excluding other income after adjusting the cost of earnings, the annual inflation at six per cent, five per cent of the average capital employed and a tax rate of 36.75 per cent.

Infosys annual report said the company had used various models for evaluating assets off the balance sheet to bring certain advances in financial reporting. ``Such an exercise also helps the Infosys management in understanding the components that make up goodwill. The aim is to lead a debate on the balance sheet,'' it added.

Goodwill is a nebulous accounting concept that is defined as the premium paid to tangible assets of a company. It is an umbrella concept that transcends components such as brand equity and human resources. Corporate attributes including core competency, market leadership, copyrights, trademarks, brands, superior earning power, excellence in management, outstanding workforce, competition, longevity were built into this concept, the annual report said.

A brand was much more than a trademark or a logo. It was a ``trustmark'' — a promise of quality and authenticity that clients can rely on, it said. Brand equity is the value addition provided to a product or a company by its brand name. It was the financial premium that a buyer was willing to pay for the brand over a generic or less worthy brand, the annual report said.

Quoting a study carried out by leading consultancy firm Interbrand, the Infosys annual report said, due to the current economic climate, 49 of the top 100 global brands and 7 of the top 10 in their list, fell in value this year. Not surprisingly, the Interbrand study found that technology companies such as Microsoft, IBM, Intel and Nokia are part of the world's 10 most valuable brands in 2002, it said.

Infosys believes the client base is its most valuable intangible asset. Its marqué clients accounted for 56 per cent of total revenues, same as in the previous year. ``Marquee clients give stability to our revenues and also reduce our marketing costs,'' the firm said.

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