Why JSW Will Pay Promoter's Wife Rs 125 Crore
The country's third largest steel maker JSW Steel will pay about Rs 125 crore annually to its chairman Sajjan Jindal's wife Sangita as licence fee for using the "JSW" brand, which belongs to a company owned by her.
A resolution to pay 0.25 per cent of the net consolidated turnover as licence fee has been cleared by the shareholders of the company at its annual general meeting (AGM) held here today, a senior company official said.
The audit committee and the board of JSW Steel had already cleared the proposal.
JSW Steel had sought shareholders' approval for permitting "the company to enter into appropriate agreement with JSWIPL for use of the brand "JSW" and to pay a license fee of 0.25 per cent of the consolidated net turnover of the company".
JSW Investments Private Ltd (JSWIPL) is a promoter group company. "Sangita Jindal, wife of Mr Sajjan Jindal (promoter and chairman and managing director of the company), holds directly and through nominees 2,049,880 shares, representing 99.99 per cent of the total equity share capital of JSWIPL," it said.
The brand "JSW" is being used by companies which are managed by Sajjan Jindal. JSW Group has a sizable presence in core sectors of the Indian economy. Considering its track record, the JSW Brand has gained recognition and is now ranked at No. 32 in India with a brand value of $701 million as per Brand Finance Rankings 2013, the company said.
As per the deal, the amount would be paid on quarterly basis and the payment would be linked to JSW Steel's turnover.
Considering its consolidated net revenue of Rs 51,219 crore in 2013-14, the fee works out to be about Rs 125 crore.
JSW Steel said that the company has, in many ways, been able to leverage the JSW brand to its advantage in terms of attracting and retaining talent besides enhancing long term business opportunities.
Justifying the proposal, the company said a levy in the range of 0.15 per cent - 0.50 per cent of the consolidated total operating income as brand license fee is being charged by brand owners in various groups for the brand usage.
"Hence, it is proposed to pay a brand license fee of 0.25 per cent of the consolidated net turnover of the Company to JSWIPL with effect from April 1, 2014 payable quarterly subject to the company agreeing to comply with the conditions as may be stipulated for brand name usage," it said.
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