Is 250 million the proper price for Rajasthan Royals? The jury is out on the RedBird Capital’s acquisition of a 15 per cent stake within the Jaipur franchise of the Indian Premier League (IPL), but the American investor’s purchase of a 15 per cent stake at an overall valuation of Rs 1855 crore provides an indicator to the transactions expected soon. If nothing else, the RedBird-Royals deal has raised the bar for the 2 new IPL teams that the Board of Control for Cricket in India (BCCI) is getting to auction next month.
The sale has set a replacement benchmark, thinks Navrose Dondy, the founder and MD of Delhi-based Creatigies Communications Pvt Ltd. “It may be a fair price and gives heart to the present IPL owners, who may have taken success due to the pandemic, downturn, lack of crowds, etc. I even have seen a report showing a decline within the valuation of the brand IPL and its teams. This deal shows that there’s no stopping cricket in India. the sport has not only survived the pandemic but also thrived.”
BCCI is getting to complete the sale of two teams before the second leg of the IPL 14, most likely in July itself, and therefore the interested parties now have some indications on what is often the ultimate price. “We understand the tender are going to be floated next month, we’ve been expecting this for quite a while,” said a CEO of a firm that’s known to be wanting to buy a team. “We won’t be surprised if 250 million is that the base price.”
If the Royals have valued themselves at Rs 1855 crore, Chennai Super Kings’ shares are up, of late, and are sold at around Rs 75 within the unlisted market. consistent with this estimate, the worth of the MS Dhoni-led three-time IPL champions is approximately Rs 2200-2300 crores. within the listed market, its value would be 20 per cent more, around Rs 2500 crore. along with side KKR and RCB, CSK is known to be a high-value franchise, with the Mumbai Indians team expected to cost around Rs 2700-2800 crores.
But another franchise official feels Rs 1855 isn’t huge considering that the new media rights deal is around the corner. He thinks a team like Kolkata Knight Riders, which makes tons of revenue through sponsorship AND circuit collection, could cost over Rs 4000 crore once the new media rights deal, expected to rise by 50 per cent, is signed next year.
“We always knew that the new teams would be upwards of USD 300-400 million,” says N Santosh, managing partner of D&P Advisory. “Look we are talking of RR, which isn’t one among the highest-ranked franchises, going by different IPL parameters. If its value is USD 250 million, it’s only excellent news for the BCCI.” Santosh has been involved within the brand valuation of the IPL and its teams and he thinks the BCCI would position the new teams as potential No 2, 3, or 4 ranked if not No 1.
“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. a mean team now should cost USD 300 million, therefore the new team should be around 400 million (about Rs 3000 crore). If we also think about the Ahmedabad point, the most important stadium in the world, there might be an opportunity for an enormous gap between the worth of the 2 new teams – one may choose USD 400 million and another for USD 350 million,” Santosh adds.
What is often the bottom price? Those involved within the previous sale of the franchises say the bottom price isn’t important if the BCCI can confirm that more parties have shown interest. consistent with them, currently, each team gets up to 150 crores from the central revenue and a top team can make another Rs 100 crore from the gate collection and sponsorship. At the top of the year, on average, a team can have a profit of up to Rs 150 crore which can only increase once the new media rights deal is signed. therefore the new owner, buying a team for Rs 3000 crore, is virtually getting the interest-free value. He just has got to pay Rs 300 crore a year franchise fee for 10 years.
“He can recover around Rs 150-200 crore out of that within the first 10 years when some losses are inevitable. He will keep making the moolah after 10 years,” the source says adding, “The key to getting an honest price is telling the planet that more parties have an interest. If a possible bidder is formed known that the most important business houses have purchased the tender document, the worth will automatically increase. The media plays an enormous role in creating the hype. How the BCCI will manage the sale and orchestrate the hype is vital,” the source explains.