Brand IPL hits a sixer with BCCI's Rs 12,000 crore jackpot for two new teams
Industry experts say IPL media rights value may jump to Rs 90-100 crore per match
The auction of two new Indian Premier League (IPL) franchises for a cumulative amount of Rs 12,715 crore will prove to be a big boon for existing franchises as their valuations will see a massive upside. The overall value of the IPL ecosystem will also see a dramatic surge from its projected value of Rs 45,800 crore in 2020, as per Duff & Phelps.
On Monday, the BCCI announced RPSG Ventures and Irelia Company Pte Ltd. (CVC Capital Partners) as successful bidders for the two new teams. Sanjiv Goenka-promoted RPSG Ventures had bagged the Lucknow franchise for Rs 7090 crore, while Irelia Company had won the Ahmedabad franchise for Rs 5625 crore. RPSG Ventures and Irelia will have to pay Rs 709 crore and Rs 562.5 crore per year as franchise fee to the BCCI.
According to experts, RPSG Ventures has overpaid by at least Rs 1500 crore, considering most of the other bids were in the range of Rs 4000-5000 crore. Gautam Adani's Adani Group couldn't make it to the finishing line with a bid of Rs 5100 crore. Interestingly, RPSG Ventures had won both Lucknow and Ahmedabad franchises with a winning bid of Rs 7090 crore for both the venues. However, the company decided to go with the Lucknow franchise since it sits well with the group's larger business interests.
The Sanjiv Goenka-owned RPSG had also bid Rs 4790 crore for the Indore franchise. Barring RPSG Ventures, the other eight shortlisted companies had bid only for Ahmedabad and Lucknow.
CVC Capital, the owner of Ahmedabad franchise, is a globally renowned investor in the sports business. With $75 billion in assets and a network of 24 offices in Europe, Asia and the Americas, the company has invested in LaLiga, MotoGP, F1, Rugby, and Tennis. Unlike RPSG Ventures' extravagant bid, CVC Capital's bid was more cold and calculative. CVC's bid was Rs 525 crore more than Adani's bid of Rs 5100 crore.
The PE fund had bid Rs 5166 crore for the Lucknow franchise, while Adani had a similar bid amount for both Ahmedabad and Lucknow. Apart from RPSG, CVC, and Adani, the other shortlisted bidders included Amrit Lila Enterprises, Avashya Corporation, Capri Global, Torrent Sports Ventures, Hindustan Media Ventures, and Championship Cricket LLLC (Lancer Capital — Avram Glazer) also lost out in the bidding war.
Championship Cricket LLC, which was floated by Manchester United owner Lancer Capital (Avram Glazer), had bid Rs 4128.65 crore for Ahmedabad and Rs 4023.99 crore for Lucknow. Suresh Amritlal Kotak backed Amrit Lila Enterprises had bid Rs 4513 and 4512 crore for Ahmedabad and Lucknow respectively. Media company Hindustan Media Ventures had bid Rs 4510 crore for Lucknow and Rs 4275 crore for Ahmedabad. Capri Global, an NBFC, had bid Rs 4204 crore for both Ahmedabad and Lucknow.
Torrent Sports Ventures had bid Rs 4653 crore for Ahmedabad, while it had offered Rs 4356 crore for the Lucknow team. All Cargo Logistics had put in a bid of Rs 4140 crore (Ahmedabad) and Rs 4304 crore (Lucknow).
According to D And P India Advisory Managing Partner N Santosh, everybody anticipated the two new teams to fetch a good value, but the final value has been a surprise of sorts. “We have been analysing the IPL for close to seven years, and we were anticipating a number closer to Rs 4000-4500 crore. The Rs 7000 crore by RPSG Group is an outlier because everyone else was around Rs 5000 crore barring CVC Capital. Even if we take Rs 5000-5500 crore as the benchmark, that itself is 20% higher than what we had anticipated,” he noted.
Santosh said that the team auctions would strengthen Brand IPL even more. It will have a positive impact on the valuation of existing franchises. “This development will lift the valuations of all other franchises. Even if you ignore RPSG Group's Rs 7000 crore bid and consider Rs 5000-5500 crore as the benchmark, that only says that broadcasting rights earnings are expected to go up and maybe the expected cash flows will be much more than what people would have thought. Because of all these things, the value of all other eight existing franchises would significantly shoot up,” he contended.
"Indian Economy has been riding on foreign investment in all wakes of life since long and with CVC getting the IPL Team, it has finally arrived at IPL as well. This would make many sports giants across the globe take note of the fast-growing sports industry in India. If IPL opened up leagues across the sports in India, CVC has the potential to open up sports investment across sports," said ITW Consulting MD Bhairav Shanth.
In an interview with a business news channel, RPSG Group Chairman Sanjiv Goenka said that the net outgo in the first year of operations from the Lucknow team will be around Rs 450-500 crore. This will reduce to Rs 250-300 crore in the second year, depending on the media rights value for the next cycle. He expects the outgo to go down to roughly Rs 100 crore a year from the seventh year. “Today I am getting an IPL team for a net present value of Rs 2,100 -2,250 crore now... that is the way I look at it. With maybe year four or year five, with the permission of BCCI, I could actually dilute 25 per cent. By that time, I expect the valuation to be Rs 10,000 crore and if I dilute 25 per cent at a value of Rs 10,000 crore, the entire thing becomes free for me,” he told the channel.
D And P India Advisory's Santosh expects the per match value of IPL to go up from Rs 55-58 crore to Rs 90-100 crore which will translate to Rs 7400 crore or $1 billion per year and $5 billion over the next five-year cycle. “Our expectation is that the IPL media rights will jump to Rs 90-100 crore per match. The number of matches will also go up to 74 from 60 matches. We expect the IPL media rights value to be closer to $5 billion because 74 matches multiplied by Rs 100 crore is close to Rs 7400 crore which is close to $1 billion per annum and for a five-year period it could be close to $5 billion. The value will be anywhere between $4-5 billion,” Santosh averred.
RPSG Ventures will cut down its losses, while CVC Capital might just break-even if the rights value doubles from $2.5 billion that Star is paying. “BCCI's revenue is Rs 4000-4500 crore per season, which is basically the central pool comprising media rights and sponsorships. Half of that gets distributed among eight teams. Each team is getting Rs 250-275 crore per annum as their share of central pool revenue. Next year, this kitty will become smaller as the central pool will be divided among 10 teams.”
He continued, “If we are talking about a 50% increase in per match value, this Rs 275 crore will become Rs 400 crore. If it doubles, we are talking about Rs 500 crore of revenue just from the central pool to each of the franchises. RPSG Group is paying Rs 7000 crore which is Rs 700 crore per annum and if they get Rs 400-500 crore from central, they will have to shell just Rs 200-300 crore per annum. This is excluding team sponsorships and gate revenue.”
An experienced media professional with a strong experience in sports business said that the auction of two new teams has set the stage for an even bigger IPL media rights auction. He also noted that the value of two new teams is not a surprise, considering the likely increase in the media rights value. “For existing franchises, this will help them get good valuation. Moreover, the entry of global players like CVC Capital and Lancer Capital bodes well for the profile of IPL as a global sports property. The upcoming media rights auction will further cement the IPL's stature,” the professional said.
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