An investment in one of the Indian Premier League teams may have prepared the ground for a costly bidding war when the Indian cricket authorities add two more squads next year.
Rajasthan Royals, with only one title to show in 13 years of IPL, saw its equity valuation soar after U.S.-based Red Bird Capital bought stake in June. The firm picked up 15% in the franchisee at an enterprise value of $250 million (about Rs 1,860 crore).
Queries emailed to Red Bird Capital remained unanswered.
The investment comes after IPL matches were moved out of India to empty stadia in the U.A.E in 2020 and the event was halted mid-way because of a deadly second Covid-19 wave in 2021. The league’s brand value fell 3.6% over a year to Rs 45,800 crore in 2020—the first drop since 2014.
To be sure, Rajasthan Royals, has the lowest brand value. According to a report by Duff & Phelps, A Kroll Business, the Sanju Samson-captained side had a brand value of Rs 249 crore in 2020. Billionaire Mukesh Ambani-owned Mumbai Indians’ ranked No. 1 at Rs 761 crore.
Boost To Equity Value
With Rajasthan Royal’s enterprise value rising, other teams are expected to gain as well.
The stake sale pegs Rajasthan Royals at nine times its FY20 revenue. Based on the same multiple, Mumbai Indians’ enterprise value jumps to Rs 3,580 crore, according to BloombergQuint’s calculations based on filings with the exchanges and Ministry of Corporate Affairs. Chennai Super Kings would surge to Rs 3,209 crore. Likewise, Kolkata Knight Riders is worth Rs 2,077 crore while the Sun TV Network Ltd. chairman Kalanithi Maran-owned Sunrisers Hyderabad is pegged at Rs 2,200 crore.
The metric stands at Rs 2,863 crore and Rs 1,936 crore for JSW Sports and GMR Group co-owned Delhi Capitals and Punjab Kings, respectively.
Punjab Kings—co-owned by Dabur India Ltd. promoter direct Mohit Burman, Bollywood actress Preity Zinta, Karan Paul and Ness Wadia— was valued at Rs 1,500 crore at a buyback price of 7,661 per share in March, according to filings available with the Ministry of Corporate Affairs. That was before the stake sale by Rajasthan Royals.
Bidding War Awaits
The Board of Cricket Control of India is expected to introduce two new IPL teams this year, taking the total to 10.
Auctions for the two new teams is expected to begin in August and will be completed by October and players’ auction will be held in December. Bidding for media rights is expected in January 2022.
The stake sale by Rajasthan Royals, approved by the IPL governing body, is expected to keep the auction price above Rs 1,850 crore. This means the new teams will see corporate and business houses bidding to get a piece of the closed league that allows for profitability of all teams.
One of the two new teams could be from Ahmedabad, the newswire IANS reported last month, but a final decision is yet to be taken. The Times of India, citing unnamed people privy to the development, said the Adani Group, the RP-Sanjeev Goenka Group, Torrent Group and Aurobindo Pharma Ltd. are among the business houses that have shown interest in owning the teams.
The IPL media rights are also likely to come up for renewal in 2022 and the cricketing body shares a portion of this with the franchisees. In 2017, Star Group outbid Sony by paying Rs 16,347 crore, or nearly $2.5 billion, to win media rights for the tournament for five years starting from 2018.
The number of matches is also expected to go up to 74 with the addition of the new teams. And franchisees will have a larger purse to acquire players in auction.