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What Could Be The Valuation For New Franchises In The Indian Premier League?

  • June 29, 2021
  • by swastika
  • 0
What Could Be The Valuation For New Franchises In The Indian Premier League?

Highlights:

  • BCCI could auction 2 new IPL franchises next month
  • Could BCCI sell the rights of the 2 new IPL franchises for more than ₹ 2,000 crore?

Is ₹ 25 crore the right price for Rajasthan Royals? The jury is out on the RedBird Capital’s acquisition of 15% stake in the Jaipur franchise of the Indian Premier League (IPL), however, the American investor’s purchase of a 15% stake at an overall valuation of ₹ 1,855 crore provides an indicator to the transactions expected soon.

If nothing else, the RedBird-Royals deal has raised the bar for the two new franchises in the Indian Premier League that the Board of Control for Cricket in India (BCCI) is planning to auction next month.

Navrose Dondy, Founder and Managing Director (MD) of Delhi-based Creatigies Communication Pvt Ltd thinks this sale has set a new benchmark.

Dondy said, “It is a fair price and definitely gives heart to the current IPL owners, who may have taken a hit because of the pandemic, downturn, lack of crowds, etc.

“I have seen a report showing a decline in the valuation of the brand IPL and its teams. This deal shows that there is no stopping cricket in India. The game has not only survived the pandemic, but also thrived.”

The BCCI is planning to complete the sale of two franchises before the second leg of the IPL 14, most probably in July itself, and the interested parties now have some indications on what can be the final price.

“We understand the tender will be floated next month, we have been waiting for this for quite some time,” said a Chief Executive Officer (CEO) of a firm that is known to be desperate to buy a team.

“We will not be surprised if 250 million is the base price,” the CEO said.

If the Rajasthan based IPL franchise valued themselves at a whopping ₹ 1,855 crore, Chennai Super Kings’ shares are up, of late, and are sold at around ₹ 75 in the unlisted market.

Going by this estimate, the value of the M S Dhoni-led three-time IPL champions is approximately between ₹ 2,200 – 2,300 crores. In the listed market, its value would be 20% more, close to ₹ 2,500 crore.

Also Read: Top 55 Interesting IPL Facts That Will Make You Crazy

Along with KKR and RCB, CSK are known to be the high-value franchises, with the Mumbai Indians team expected to cost around ₹ 2,700 – 2,800 crores.

However, another franchise official feels ₹ 1,855 is not so huge considering that the new media rights deal is around the corner. He thinks a team like Kolkata Knight Riders (KKR), which makes a lot of revenue through sponsorship and gate collection, could cost more than ₹ 4,000 crore once the new media rights deal, expected to rise by 50%, is signed next year.

N Santosh, Managing Partner of D&P Advisory said, “We always knew that the new teams would be upwards of USD 300-400 million,” and added, “Look we are talking of RR, which is not one of the highest-ranked franchises, going by different IPL parameters. If its value is USD 250 million, it is only good news for the BCCI.”

Santosh has been involved in the brand valuation of the IPL and its teams and thinks that the BCCI would position the new teams as potential No 2, 3 or 4 ranked if not No 1.

Santosh said, “In that perspective, the BCCI would be looking between USD 300-400 million. We were anticipating that six months back. With RedBird, that estimation gets reaffirmed. An average team now should cost USD 300 million, so the new team should be around 400 million (about Rs 3000 crore).

“If we also factor in the Ahmedabad point, the largest stadium in the world, there could be a chance of a huge gap between the price of the two new teams – one may go for USD 400 million and another for USD 350 million”.

What could the base price? People who were involved in the previous sale of the franchises say the base price is not important if the BCCI can make sure that more parties have shown interest. According to them, currently, each team gets up to ₹ 150 crore from the central revenue and a top team can make another ₹ 100 crore from the gate collection and sponsorship.

At the end of the year, on average, a team can have a profit of as much as ₹ 150 crore which will only increase once the new media rights deal is signed. Hence, the new owner, buying a team for ₹ 3,000 crore, is virtually getting the interest free value. He just has to pay a ₹ 300 crore a year franchise fee for 10 years.

The sources quoted by Cricbuzz say, “He can recover around Rs 150-200 crore out of that in the first 10 years when some losses are inevitable. He will keep making the moolah after 10 years”.

It was explained, “The key to getting a good price is telling the world that more parties have interest. If a potential bidder is made known that the biggest business houses have purchased the tender document, the price will automatically shoot up. The media plays a big role in creating the hype. How the BCCI will manage the sale and orchestrate the hype is important”.

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