The $225 million dollar question

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Will price be a deterrent for team auction?

With the tender process for the two fresh team inductioninto IPL season 4 on the anvil, entities and individuals are readyingto take position. Though the entry barrier of $225 million as thereserve price for the auction is considered a bit steep, the final bidamount will be spread over 10 years and a large chunk of this will besubsidised by broadcast revenues. Till the end of season 3, eightteams would have shared the booty, but in season 4, this will beshared by 10 franchise owners. The boradcast revenues are directed toa central pool, 40% of which go to IPL itself, 54% to franchisees and6% as prize money. The money will be distributed in these proportionsuntil 2017, after which the share of IPL will be 50%, franchisees 45%and prize money 5%. However due to the fracas over broadcast rights inthe light of the tournament moving to South Africa for season 2, thetelecast cost was renegotiated. IPL had agreed to subsidize thedifference in operating cost between India and South Africa as itdecided to move to the African nation after the security concernsraised because of its coincidence with India's general elections.Twenty per cent of these proceeds were to go to IPL, 8% as prize moneyand 72% was to be distributed to the franchisees. The money would bedistributed in these proportions until 2012, after which the IPL wouldgo public and list its shares. That at least is the plan.
What is crucial for the new franchise owners is the city that they arelikely to be allotted. For instance in season 3, four new venues havebeen added - Nagpur, Vishakhapatnam, Ahmedabad and Dharamsala, havebeen added. In season 3 of course, Nagpur will feature matchesinvolving the Mumbai Indians, Ahmedabad for the Rajasthan Royals,Dharmasala for the Kings XI Punjab Mohali team and Vishakapatnam forthe Hyderabad Deccan Chargers. But once the two new franchise ownersare added, then following the principle of city based teams, the newteams will probably come from this bucket itself. Given that the newteams will have to have supporting infrastructure, then these fourcities will get priority. Other centres which have the necessaryinfrastructure - stadium with modern facilities, lighting, hotel andairline infrastructure include Gwalior and Cuttack.
When the IPL was architected first, the total base price for auctionwas US $400 million ($50 million each), and the auction fetched US$723.59 million. The lowest amount was paid by Emerging Mediaconsortium which coughed up $67 million for Rajasthan Royals whileReliance Industries boss Mukesh Ambani paid the highest $111.9 millionfor Mumbai Indians. So, while the general consensus of opinion earlier wasthat Ahmedabad would be picked up by Anil Ambani owned ADAG, it isstill not clear whether he will actually make a meaningful bid.Believed to be number nine in the list of bidders the first timeround, he had set his eyes on Ahmedabad which holds fond memories forhim. This is where he started his career at Reliance's textile plantswhen he returned from Wharton. But ADAG insiders have revealed that afinal decision on a bid is yet to be firmed up. If it does fructifythen both the Ambani brothers will be pitted against one another onthe cricket field.
It is more or less certain however, that Hero Honda MD & CEO PawanMunjal bidding for a team in his personal capacity. Sources close toMunjal however, have indicated that he will probably bid for theDharamsala franchise, but price remains a deterrent. What is crucialin this mix is who will bag Ahmedabad. The Motera is one of the betterstadiums for cricket in India. At the same time if the Jaipurfranchise moves to Ahmedabad, then that too throws up an interestingdimension. With Lalit Modi having been decisively ousted from RCAadministration, will Rajasthan Royals, partly owned by Modi's brotherin law Suresh Chellaram move base? All this speculation will be laidto rest if Anil Ambani decides to bid in his personal capacity anddecides to go to battle with his brother on the cricketing green. WhenICL owner Subhash Chandra was negotiating with BCCI over closure ofthe rebel league, the BCCI had offered him a franchise in the IPL. Itis not known whether Chandra still has the appetite for another crackat cricket. This seems most doubtful.
Sportzpower spoke to another prospective bidder race horse owner andSerum Institute scion Adar Poonawala who said, "Yes, my friends and Ihad discussed this sometime back, very honestly I haven't looked atthe numbers since. I will have to go over the dynamics - how much hasto be put in, what is the costing, how much will be subsidised by thebroadcast revenues etc."
Poonawala further added that once all this is in the bag, he wouldlike to approach Lalit Modi who he knows well. He said, "Since time isshort, I can start the process, but it will have to be as a part of aconsortium. Rigging up a consortium at such short notice seemsdoubtful, but I am going to be speaking to like minded people in Punelike Baba Kalyani etc and if one can construct a bid, then so be it."Subroto Roy chairman and managing worker of Sahara India Pariwar isanother prospective bidder, but he will have to first find a centreoutside his area of influence - Uttar Pradesh. Sahara Group insidersclaim that Roy hasn't decided yet on making a bid. Other likelybidders as sportzpower has pointed out recently include diversifiedconglomerate ITC which will bid under the Wills brand name and twolarge telecoms - one from north India and the other a MNC based out ofMumbai. Given the steep entry cost, it is understood that consortiumson the lines of Emerging Media which owns RR and Kings XI Punjab whichhas multiple owners may well be the way forward.
Lalit Modi is reportedly scheduling an IPL Governing Council meetingon February 12 or thereabouts to decide on the bid conditionalities.He would like the new franchise owners to be in place before March 12so that they can understand the complexities of owning and running afranchise. Everything now hinges on the $225 million base price forthe auction. Will people take the plunge is now a $225 millionquestion?