UTI in talks for royalty on brand use by subsidiaries
Shaji Vikraman & MK Venu MUMBAI/NEW DELHI
COME 2008, and the use of the UTI brand name will come at a price for entities riding on the strength of it. Talks are on to firm up an agreement that will make it incumbent for any of the firms promoted by the erstwhile mutual fund UTI, such as UTI Bank and other subsidiaries, to pay a royalty for use of the UTI brand name to UTI Asset Management Co (UTI AMC). The model may be on the lines of the one the house of Tatas have adopted. All Tata group companies pay royalty fees to the holding company, Tata Sons, for using the brand name and logo. The fees are based on a percentage of the company’s revenues. “An agreement is being worked out and would be in place well before 2008 on the licensing of the UTI brand name,” top government sources said. Industry officials said the proposed agreement may incorporate a noncompete clause that will ensure that no entity using the UTI brand name can compete with UTI AMC in the mutual fund segment. The exclusive right to use the UTI brand name that still resonates with a lot of investors in the local financial sector resides with UTI AMC, the country’s largest fund house. The brand value is accentuated, especially in the semi-urban and relativelysmaller towns, where it is seen as a proxy for the sovereign. The UTI brand licensing right was vested with the UTI AMC in 2005 under an agreement after the government sold the AMC to the four sponsors: SBI, LIC, PNB and BoB. The valuation of the AMC took into account the UTI brand name and, therefore, it was the AMC that got to use the brandname for keeps. Senior government officials said talks have been kicked off on the issue and an agreement to incorporate payment of royalty fees to UTI AMC by UTI entities would be in place before January 2008.