Brand valuation: what was actually paid for in Air India, Vodafone, and Star India

Brand valuation is the most contested line item in any acquisition. The seller wants to attribute as much of the purchase price as possible to brand and goodwill, because brand is the residual that justifies any premium over tangible assets. The buyer wants to attribute as much as possible to tangible assets and contractual rights, because those are deductible and amortizable in clean ways. The assessing officer wants to attribute as much as possible to taxable goodwill so the buyer cannot amortize it for tax purposes. The arguments turn on valuation methodology.

Three Indian deals are worth dissecting: Air India (Tata, 2021), Vodafone Idea (Vodafone-Idea merger, 2018), and Star India (Disney-Reliance merger, 2024). Each one allocated a meaningful slice of the purchase consideration to brand. The methods used were not the same.

Why brand sits separately from goodwill under Ind-AS 38

Under Indian Accounting Standard 38 (which mirrors IAS 38), an intangible asset is recognized separately from goodwill if it is identifiable, controllable, and capable of generating economic benefits. A brand — when supported by a trademark registration, customer recognition, and demonstrable economic effect — meets these tests.

The accounting consequence is significant. A brand recognized as a separate intangible asset is amortized over its useful life, which for a strong brand can be 10-20 years. Goodwill, by contrast, is not amortized under Ind-AS 36; it is tested for impairment annually. The buyer often prefers the brand allocation precisely because it produces predictable annual amortization charges rather than the uncertainty of impairment testing.

For tax purposes under Indian law, brand and goodwill are both treated as intangible assets eligible for depreciation at 25 percent under Section 32, following the 2021 amendment that clarified goodwill's depreciation status (after the Finance Act 2021 removed the prior depreciation allowance for goodwill acquired through certain transactions). The accounting allocation does not automatically flow through to tax treatment.

Air India: the relief-from-royalty argument

The Tata acquisition of Air India in October 2021 was at an enterprise value of Rs. 18,000 crore, comprising Rs. 2,700 crore in cash, Rs. 15,300 crore in debt assumption, and a Rs. 16,300 crore retention of accumulated losses for tax purposes. The airline at acquisition had negative book equity. Aircraft were aging. Routes and landing slots had been ceded to competitors during the pre-privatization years.

What was bought for the premium? Three categories of intangibles, with brand being the largest.

Brand 'Air India' and 'Indian'. The trademarks, the legacy brand recognition, and the inherited right to operate under these names. Independent analyst estimates pegged this at Rs. 5,000-7,000 crore using a relief-from-royalty method. The method asks: if Tata did not own the Air India brand and had to license it from a third party, what royalty rate would the brand command? Aviation industry brand royalties typically sit in the 1.5-3 percent of revenue range. Applied to projected Air India revenue of Rs. 25,000-30,000 crore in steady state, the annual royalty saving is Rs. 400-900 crore. Capitalized at an appropriate discount rate and useful life, the brand value comes out in the Rs. 5,000-7,000 crore range.

Bilateral rights and slots. Air India holds bilateral landing rights at international airports that are functionally non-replicable. London Heathrow, JFK, Frankfurt, Singapore. These slots have been valued in the secondary slot market at Rs. 80-200 crore per slot for prime times. Air India holds dozens. Allocated value: Rs. 3,500-5,000 crore.

Loyalty programme (Flying Returns). The customer database and points liability, net of acquisition cost of the customer base. Allocated value: roughly Rs. 800-1,200 crore.

The residual — what was paid over and above identifiable intangibles plus tangible assets — was goodwill. For Air India this residual was small because the identifiable intangibles soaked up most of the premium.

Vodafone Idea: brand restructure inside a merger

The 2018 Vodafone-Idea merger was a different problem. Both companies brought brands that had standalone value. The merged entity initially operated as 'Vodafone Idea' with a co-branded identity. In 2020, the company rebranded to 'Vi.'

The intangible allocation done at merger close attributed roughly Rs. 11,000 crore to the Vodafone brand and Rs. 6,500 crore to the Idea brand, using relief-from-royalty calibrated against telecom industry brand royalty rates of 0.5-1 percent of revenue. When the company subsequently rebranded to Vi, the legacy brand carrying values were tested for impairment under Ind-AS 36. The economic logic was that the Vi brand subsumed but did not extinguish the legacy brand equity — customers still recognize Vodafone and Idea.

The impairment write-downs taken in the 2020-21 financial year were significant but did not fully extinguish the brand carrying values. This is the typical pattern when a company rebrands: the new brand inherits the equity, the old brands are not zero, and the impairment calls require judgment.

Star India: brand inside a media-network merger

The 2024 Disney-Reliance media merger combined Star India, Disney+ Hotstar, Viacom18, and JioCinema. The merger consideration involved equity swaps rather than cash, but the underlying intangible allocation followed the same methodology.

Star India brand. Decades of consumer recognition in regional television. Valued using relief-from-royalty against media industry royalty rates of 1-2 percent of advertising and subscription revenue.

Hotstar brand. Strong digital recognition, sports streaming association.

Channel-specific brands. Star Plus, Star Sports, Colors, MTV India — each with separate carrying values in the merger accounts.

The total brand allocation across the merger was reportedly in the range of Rs. 12,000-18,000 crore, with goodwill on top. The Star India brand alone was reported to carry Rs. 5,000-7,000 crore of allocated value. The methodology was the same as in Air India: project the relevant revenue base, apply industry royalty rates, capitalize the savings at an appropriate discount rate.

The three methods and when each fits

Cost approach

What would it cost to recreate the brand from scratch? Marketing spend, agency fees, time-to-recognition. For young brands, this approach can produce a defensible number. For mature brands like Air India or Star, the cost approach is meaningless because the brand could not be recreated at any cost — the equity is the product of decades of consumer behavior.

Market approach

Look at recent transactions where brands have been sold separately. The challenge in India is that pure brand-only transactions are rare. The market approach is occasionally useful for FMCG brand acquisitions (Procter & Gamble's purchase of specific Indian brand portfolios), but for most large transactions there is no direct comparable.

Income approach — relief from royalty

The dominant method in Indian deal-making. Estimate the royalty that the brand would command if licensed. Apply it to projected revenue. Discount back. The output is the brand's contribution to enterprise value.

The judgment lives in the royalty rate. Aviation: 1.5-3 percent. Telecom: 0.5-1 percent. Media: 1-2 percent. FMCG: 3-7 percent. Luxury: 5-15 percent. The narrower the band, the more defensible the number. The wider the band, the more the valuation hinges on a single chosen rate.

ICAI's framework and where it leaves gaps

ICAI Valuation Standard 302 covers intangible asset valuation. It accepts all three approaches and provides guidance on selection criteria. The framework is consistent with International Valuation Standards.

Where the standard leaves room for argument is in the useful life assumption. A brand with an indefinite useful life is not amortized; it is impaired-tested annually. A brand with a definite useful life is amortized over that life. The choice of 'indefinite' versus, say, '15 years' can move annual P&L charges by hundreds of crores for large brand allocations. Indian regulators have pushed back on indefinite useful lives in some cases, particularly post-merger, where the brand's standalone identity is being subsumed.

What founders and CFOs should take from this

Three things.

First, the brand value in any deal is not a residual or an afterthought. It is a structured valuation calculation that has to stand up to auditor and tax-officer scrutiny. The relief-from-royalty method is the default; the royalty rate is the contested input.

Second, the accounting allocation between brand and goodwill matters for the buyer's future financials. A larger brand allocation produces predictable amortization. A larger goodwill allocation produces impairment-test exposure. Acquirers usually prefer the former.

Third, the tax treatment under Indian law is separate from the accounting treatment. Both brand and goodwill are depreciable at 25 percent under Section 32 (post-2021 amendments), but the eligibility conditions are specific. Get a tax position memo as part of the deal documentation, not after.