BEHIND THE NEWS
Just when you thought that cricket was losing its luminescence as a money multiplying vehicle, comes the news that bulge bracket investors are back to pump prime the game in the land. By forking out $703 million for two franchises on Sunday, it is a reaffirmation that the game's lustre is brighter than ever. Yes, to use Indian Premier League commissioner Lalit Modi's famous catch phrase - IPL is recession free. At $703 million, the combined bids of the eight franchsises in season 1 pale into insigificance. UK based Brand Finance Plc's astronomical valuation earlier this year of IPL at $4.13 billion now seems puny. Imagine that the combined valuations of the eight franchises calculated by Brand Finance in February 2010 was $333.33 million. The very same amount that Rendezvouz has paid for a team. According to the study, Chennai Super Kings (CSK) emerged as 2009's most valuable team with a brand value of $ 48.4 million, or Rs 224 crore, replacing Kolkata Knight Riders (KKR) at $ 46 million, or Rs 213 crore. Rajasthan Royals at $ 45.2 million, or Rs 209 crore, was third in the pecking order. The owner of CSK N Srinivasan had then said, “With IPL’s ratings and royalties on the rise, it doesn’t come as a surprise to me.”
Whenever a new act comes to town, cassandras doubt its sustainability, me included. A strange kind of sub tribal loyalty has taken root with jingoism being replaced by this radical new phenomenon. The club vs country debate went out of the window in double quick time. Yes, to everyone's surprise, the IPL seems like a an out and out winner. Imagine this is the first time in sport anywhere in the world that player auctions take place. Even in the high profile world of cash rich football, you have transfers but no public auctions.
In fact, its return to India after a one year hiatus appears to have lent it some ballast. On Sunday, Sahara Adventure Sports ($ 370 million) and Rendezvous World Sports ($ 333.33 million) paid a total of $ 703 million -- nearly Rs 3,235 crore -- to bag the Pune and Kochi franchises respectively and the amount is higher than the collective worth of Rs 2,840 crore of the original eight franchises. Think of what Emerging Media paid for Rajasthan Royals - $67 million and then think of what Subroto Roy has coughed up. But what the new price tags do is raise the bar for the existing franchsises. Simply because if two new franchises without teams or any other support infrastructure are valued at $330 million plus, then ergo imagine what the existing franchises are now worth? In many ways, it is the existing franchises who will be thrilled to bits at this value explosion. I reckon the base price is clearly $330 million for all existing eight franchises. The better teams RC, DC, MI would like to believe that they are worth $450 million each. So, a whole world, perhaps Pandora has opened up for these teams vis a vis valuations.
It is now increasingly clear that many of the franchises like Deccan Chargers, Chennai Super Kings, Mumbai Indians and Royal Challengers Bangalore are contemplating listings in 2011. By floating these entities, the true worth of these city based clubs will finally be known. First of the blocks will be N Srinivasan Indian Cements owned IPL subsidiary. It is believed that during their recent QIP placement investor meet, they have given a timeline for the float in 2011. The English Premier League on which the IPL is modelled is valued at $12 billion. manchester United alone has a valuation of $1.8 billion, Arsenal $1.2 billion, Liverpool $1.05 billion and Chelsea $764 million, according to Forbes. With the new richer valuations, IPL valuations will have to be reconfigured. They will be closer to $ eight billion now. That is awesome considering that IPL is only in its third season. EPL has a viewership of 600 million homes while IPL has a viewership of 37 million homes, with youtube opening up new vistas, EPL revenues are 2 billion pounds sterling while IPL revenues are not too far behind at Rs 11,000 crore, but EPL has 20 teams and IPL has eight only.
Modi was obviously preening like a peacock at the sight of these fancy amounts. He said, "I was indeed a little bit surprised by the amount. Honestly speaking, I thought the winning bid would be $ 300-320 million. So it was $ 40-50 million higher than my expectation. The bidders must have done their math very well." Sahara has zeroed in on Pune because its locational and logistical advantages. If you are wondering why it didn't choose Kanpur, then remember that Sahara's prestigious Aamby Valley project is right between Mumbai and Pune. Sahara's new cricket stadium will be on the periphery of Pune, in Gahunje, which is on the Mumbai-Pune expressway. A spanking new stadium is being built there with Shapoorji Pallonji being the principal contractor. Kochi doesn't even have a stadium at the moment. "Kerala Cricket Association is building a world class stadium. Till that is ready, IPL will provide an alternate venue," Modi said the addition of two more teams will take the total number of matches to 94 in the new season. That Subroto Roy would bid aggressively is something that one visualised. Although the strength of the bid stunned one and all. But it is the other bidder who has come in like a bolt from the blue leaving Videocon and Gautam Adani in its wake. Practically nothing is known about the winner of the Kochi franchise. There are five partners in this consortium - the Rendezvous group, Parini developers, Anand Shah Estate, Anchor Earth Private Limited and Film Waves - all of them unknown. Wires have reported that minister of state for external affairs Shashi Tharoor was involved in bringing together the group, but has no stake in the franchise. Speaking to reporters, Shailendra Gaikwad of Rendezvous World Sport said, "We have closely been following every development within the IPL, right from the inaugural year. Today, I am very happy for our consortium of Rendezvous World Sport and the people of Kochi as we finally have a team to call our own in this amazing city-based sports franchise" Wires also reported Tharoor saying, "All I did on my part was to offer encouragement, blessings and expert advise when required to the bidders. Beyond that, I had no role to play. It's a group of business people and I understand it's a business decision," Tharoor said.
"We are absolutely delighted by the overwhelming response to our global Franchise Invitation to Tender process. As you can see the bidding for the two new official Franchises has been fair and transparent and is indicative of the revenue earning potential that the Indian Premier League represents. I am also certain that the IPL fans in Kochi and Pune would be particularly excited with an IPL franchise for their respective cities. Given the high quality of franchises that we have selected, we are certain that both the new franchises will do everything in their power to ensure good competitive teams for next year. All the bids received were of a very high standard and we would like to thank all of the organisations for their participation.” On winning the Pune franchise Abhijit Sarkar of Sahara Adventure Sports said, "The IPL is undoubtedly the most ground breaking international sports development in living memory. There is no precedent for what has been achieved by Lalit Modi and the BCCI over the last three years and the Sahara group is immensely proud to have won the Invitation to Tender from Pune. I can promise the people of Pune – a team they will be proud of in next year’s IPL 2011. I would like to thank Lalit Modi and the BCCI-IPL for running a very transparent process to allocate the Franchises. All of us within Sahara Adventure Sports just cannot wait for IPL 2011 to commence.”
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