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The Challenges at JSW Steel: Brand Valuation and Corporate Governance Issues

Author

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  • Pitabas Mohanty

    (XLRI — Xavier School of Management, Jamshedpur, India)

  • Tina Stephen

    (XLRI — Xavier School of Management, Jamshedpur, India)

Abstract

The shareholders of JSW Steel received a list of 24 items that would be put to vote in the AGM of the company, to be held on 31 July, 2014 along with the annual report of the company for the 2013–14 fiscal year. Item No. 23 of this list was a surprising addition, as the company stated that the brand name ‘JSW’ belongs to a private company called JSW Investments Private Limited (JSWIPL), promoted by Ms. Sangeeta Jindal, the wife of Mr. Sajjan Jindal, the Managing Director of JSW Jindal. It further stated that henceforth JSW Steel would pay 0.25% of the net consolidated turnover to JSWIPL for the use and promotion of the brand. The stock price fell in reaction to this news.JSW Steel justified its move by arguing that payment of royalties for the use of brand name is a common practice followed by Indian business groups. Many corporate governance experts, however, called this an abusive transaction and advised the shareholders to vote against the proposal. This case allows the examination of issues such as related party transactions and their corporate governance implications and the relevance of brand valuation for a steel company.

Suggested Citation

  • Pitabas Mohanty & Tina Stephen, 2017. "The Challenges at JSW Steel: Brand Valuation and Corporate Governance Issues," Asian Case Research Journal (ACRJ), World Scientific Publishing Co. Pte. Ltd., vol. 21(01), pages 231-251, June.
    • Handle: RePEc:wsi:acrjxx:v:21:y:2017:i:01:n:s0218927517500080
    DOI: 10.1142/S0218927517500080
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