IPL - A money-minting machine

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safari
28 Oct 2021 | 02:51 AM
authorBastab K Parida

IPL - A money-minting machine

Even a company like Adani Sportsline Pvt. Ltd, whose parent conglomerate is a big contributor to Nifty50 Benchmark Index, missed out

Monday marks a historic day in the history of Indian cricket, or dare I say, in the history of cricket in general. Yes, Afghanistan thrashed Scotland by a massive margin of 130 runs to get their T20 World Cup campaign going but nothing held the imagination quite like the technical and financial evaluation going on at the Taj, Dubai by a bunch of lawyers and chartered accountants. Some complex mathematics were flashing on social media and people waited to get a grasp of the eventual outcome. 

As the news came out, the BCCI sold two franchises for a massive sum of INR 12,715 crore, showing the kind of financial might that is hard to process. It is quite remarkable because the minimum bidding price set by the BCCI was INR 2000 crore. Even a company like Adani Sportsline Pvt. Ltd, whose parent conglomerate has 10 publicly-traded companies in National Stock Exchange and a big contributor to Nifty50 Benchmark Index, missed out. 

Cricket in India is big - mainly because of the huge diaspora that madly loves their game. Indian Premier League has added the cherry on the top and created a model of distraction that rides on the wave of popularity and exclusivity - which is virtually impossible for any other board to pull off. On the base of it, there is an intrinsic relationship between the level of cricket and a clear path of paying back to the investors who have made the IPL what it is. Thus it is no surprise that even foreign entities like Lancer Capital, which is owned by Avram Glazer, part of the Glazer family that owns Manchester United, and CVC Capital Partners, a Luxembourg-based private equity and investment advisory firm, showed their interest. The latter won the bid for the Ahmedabad franchise, marking their foray into the Indian sporting ecosystem. 

“This massive investment shows how our product has shaped up in the last one and a half-decade and it is set to break all the records in the future. BCCI aspires to make IPL among the top three leagues in the world, and not just in cricket. We are well-positioned to do the same in the next five years,” a senior BCCI official told Cricket.com.

The statement stands true in multiple counts and not just in terms of inducting new franchises. Last year, when VIVO decided to pull out of the 2020 edition, citing force majeure, the board didn’t face any difficulties in finding a fresh sponsor amidst a global pandemic. Dream11 instantly came on board and the tournament went on smoothly. The board treasury spent more than 40-50% than normal as the hosting fees in the Emirates but eventually ended up with revenues worth ₹4,000 crores, reduced costs by 35%, and increased viewership by 25%.

The 2017 VIVO deal had alone provided the BCCI a premium of almost 455% more than the PepsiCo deal, which paid around INR 396 crore in 2012 for a five-year period between 2013 and 2017. It was a solid deal as per the market price during that time - both financially and in terms of strategic brand awareness point of view. At the time of pulling out, the beverage giant had claimed that the BCCI had breached its contract and “the fraudulent and illegal activities committed in the IPL adversely affected the image of the IPL as also the game of cricket...”

The 2013 scandal was disturbing and could have easily played a massive role in downgrading IPL’s brand value. The absence of Chennai Super Kings, one of the marquee franchises, was another gigantic blow. However, the BCCI bounced back in some style and landed a bigger coup than expected by signing the Mobile giant. Further, it was a great luxury that they got Star Sports on board for the next year, who put up a global bid of 16,347 Crore to own the TV rights for five years. 

And now that the RP- Sanjeev Goenka Group and CVC Capital have come on board, by paying 250% and 160% more than BCCI's base price of INR 2000 crore for two new franchises, it has also meant the other eight franchises have massively taken a leap in valuations. If ever these franchises want to sell a stake in their brand to a new entrant in the space, the paid-up capital will be in line with what the new valuations are. That significantly boosts BCCI’s revenue structure - both in terms of franchise fees and broadcasting rights - apart from the amount they are set to receive from the Lucknow and Ahmedabad-based franchises. 

“You can expect the TV and digital rights to jump to a new threshold immediately after this deal. The TV rights in 2017 seemed other-worldly when Star bid for that amount but it all makes sense now. Anything close to 40,000 Crore is a realistic proposition,” an industry analyst told Cricket.com. 

The entire show has only ensured one thing - that brands trust in Indian Cricket and what the IPL has set to offer in the next decade or so. The juggernaut is set to roll.

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Indian Premier League, 2021

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