IPL's big money spinners are on the block

Ashish Khurana - Televisionpoint.com | Mumbai
The champions of the first Indian Premier League (IPL), Rajasthan Royals, runners-up Chennai Super Kings and multi starrer Deccan Chargers are seeking to raise money by diluting their stake in these entities as they gear up to make big bucks in the new season.

While some of these teams have already roped in investment bankers or financial and business advisory firms such as KPMG to work out valuations, financial experts and valuers differ widely in their estimates.

On their part, these teams are expecting valuations of $ 250 million, but experts like Sanjiv Agarwal of Ernst and Young say they won't be surprised if some of the multi-starrer teams command valuations two or three times that figure.

Agarwal was part of the E&Y team that had done the valuation for Team India some three years ago. Today, he puts Team India's valuation at $ 5 billion.

The first IPL season was a huge success and some franchises such as Chennai Super Kings, Kolkata Knight Riders and Rajasthan Royals even managed to break even or spin profits.

Speaking to Televisionpoint.com, N Srinivasan, vice-chairman and managing director, India Cements, which owns the Chennai Super Kings, however, said there was no plan to dilute any stake in the team.

"I don't intend to sell any stake in the Chennai IPL team, and, hence, do not want to indicate the kind of valuations. Because, the moment I do that, you will say that I intend to sell the stake," he said.

Srinivasan is also secretary for the Board of Control for Cricket in India. "Valuations are what people perceive. But, I sincerely feel that the valuations of IPL teams will soar, given the response to the whole thing," Srinivasan said.

When contacted, KPMG executive director Rajesh Jain refused to put a valuation for any IPL team. But he said value estimates for a team would be done solely on the basis of cash flow. He said quite a number of investors, both domestic and foreign, were looking at acquiring stakes in IPL franchisees for strategic purposes.

The market buzz is that media firms, ADAG, Sahara Group, Future Group and financial entities such as ICICI Venture, Sequoia Capital and India Value Fund are exploring opportunities to join the IPL bandwagon. Names of some international players like Providence, Macquire Bank, DE Shaw, Deutsche Bank, Alcazar, Engelfield are also doing the rounds as possible investors in IPL franchisees.

This year, the teams are likely to rake in higher revenues after the IPL governing council approved a number of options to the franchisees to curb their losses. Chennai Super Kings, in fact, managed to even out cash-wise last quarter (Q2).

"This quarter, it will make money through participation fee and share of revenues as the Chennai IPL team has qualified for the Champions League," Srinivasan said while announcing the second quarter results of India Cements recently.

Agarwal also says that valuation of the IPL teams will be done on the basis of their profitability, revenue models and future cash flow.

"Suppose we have some 60-odd matches of three hours each in the second season, allowing say one-and-a-half hour of commercial time on television, the event will spin off around Rs 2,000 crore even if we put a rate of Rs 10 lakh per three-second spot. That works out to at least Rs 150180 crore per team from television commercials alone. This shows the immense possibilities," Agarwal points out.

Deccan Chargers, which is owned by Deccan Chronicle Holdings Ltd (DCHL), too, has been looking at a similar option to infuse capital into its new subsidiary Deccan Chargers Sporting Ventures.