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Is the IPL's brand value diminishing?

By Harish Kotian
October 25, 2012 19:35 IST
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For the Board of Control for Cricket India, the Indian Premier League continues to be the goose that lays the golden egg. Its coffers swelled by another few million on Thursday when Sun TV Network bought the Hyderabad franchise for a whopping Rs 85.05 crore per year, approximately Rs 425 crore for the five-year duration.

The Sun TV group bagged the franchise after previous owners Deccan Chargers' contract was terminated by the BCCI earlier this month for failing to furnish bank guarantee.

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Despite the bid amount not being as high as expected, BCCI president N Srinivasan sounded delighted after the result was announced in Mumbai.

"If you see, this is twice the value of Deccan Chargers. If you take into account the sharing of central rights compared to the earlier expansion of franchise, you will find that this bid represents a higher value; it is a very good value.

"More importantly, it is a very credible franchise owner who is in the media; so they will add a lot of value to the league... so that is something to be very happy about," he said.

Deccan Chargers had originally bought the Hyderabad franchise in 2008, before the inaugural season of the IPL, for US $107 million (approx Rs 428 crore) for a period of ten years.

Now, with Sun TV network paying 85 crore per year, compared to Deccan's 42 crore per year, paid five years back, the BCCI has got double the value for the Hyderabad franchise in five years.

But rewind to two years back -- when Sahara India Pariwar bought the Pune franchise for $370 million (approx Rs 1900 crore), which roughly translates to 190 crore per year.

In short, the Sun TV group got a good deal by getting their hands on an IPL team and becoming part of the cash-rich and hugely popular Twenty20 league.

Sun TV group, owned by Kalanidhi Maran, had virtually no competition, as there was only another bid in the form of PVP Ventures, who quoted 69 crore.

"It is a great opportunity. The price that we paid is a very attractive price, because the last deal was almost at 170 crore per annum and we got it for 50 per cent of the last transaction price," SL Narayanan, Group CFO, Sun TV, said.

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With prices dropping, the team valuations, instead of going up, seem heading south. One major reason for that could be the numerous issues the T20 league has faced over the years, and growing friction between franchises owners.

In the last two-three years, the BCCI terminated four teams from the league for various breaches of contract, but Kings XI Punjab and Rajasthan Royals were able to force their way back by taking the legal route.

Infighting between Kochi Tuskers's numerous owners and the debt-ridden Deccan Chargers were unable to save themselves despite taking the legal route. Former IPL commissioner Lalit Modi was also forced to take shelter in London after he was charged with financial misdoings during his tenure.

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But BCCI chief Srinivasan is adamant that the league's value continues to grow.

"If you see this is twice the value of Deccan Chargers. If you take into account the sharing of central rights compared to the earlier expansion of franchise, you will find that this bid represents a higher value; it is a very good value. More importantly, it is a very credible franchise owner who is in the media, so they will add a lot of value to the league; that is something to be very happy about," he said, pointing to the original values back in 2008.

He said Pune, which paid way too much than the others, gets a higher share of the revenue, compared to the other franchises.

"The Pune franchise gets 80 per cent of the central revenue, but from five years onwards the other franchises get 60 per cent. So there is a difference in the income. So, as a result, you have to factor that in.

"As far as the BCCI is concerned, it is a very good value and a good franchise coming, so it will add luster to the league."

All the players who were with Deccan Chargers have been offered to the new franchise, which will be named in the next few days.

Srinivasan pointed out that the Sun group have a week to decide which players they want to retain and must make their decision by October 31.

"All the players of Deccan Chargers are available to the new franchise. I think they have signed agreements and the new franchise will have time till October 31st to decide who they want to retain, but all the Deccan Chargers players who are with Deccan Chargers are now with Sun Group. As far as the players, their interest is completely protected and they have also been paid for the last year," he said.

With nearly all the world's top players signed up by the remaining teams, the only logical option for the Sun TV group would be continuing with the current set of players.

There will also be a chance to include more players during the IPL Players' Auction, tentatively scheduled for December or January, but one is not sure how many top players would be available then.

"What BCCI has advised us is that at our option we could retain the entire team. We also have opportunities to get more players; there are outstanding cricketing names here, like Dale Steyn, Kumar Sangakkara, Cameron White, JP Duminy, Shikhar Dhawan and Ishant Sharma. It is a great team, but we will decide on the actual composition of the team and support staff in the next few days. We are very excited," Narayanan said.

He also added that the Sun TV Network has also put a lot of thought into the mathematics of the project and is confident of making good profit on their investment.

"We have a fair understanding of the inflow and what kind of expenses; so we have done our maths and this is going to be a very attractive deal for us. Let me clarify this one last time, this will be a very, very eps (earning per share) accretive  deal, we will create shareholder value and I have no doubt about that in my mind," said Narayanan.

The Sun TV network is an Indian mass media, based in Chennai. It owns a number of television channels, newspapers and radio stations in multiple languages. The company is owned by Kalanidhi Maran, who also owns the Spice Jet airline. He is the son of former Union minister of commerce Murasoli Maran. His brother, Dayanidhi Maran, was a former telecom minister in the Union cabinet and also served as the Central textile minister.

The BCCI, with a number of high-level politicians in its fold, is all too pleased to welcome another politically connected family.

"The BCCI is amalgam of various interests, as far as the BCCI managing committee, and I don't think we ever thought of that, we don't think of politics. All of us are here for sports," said Srinivasan.

Photograph: Ritam Banerjee/Getty Images

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Harish Kotian