Eye-popping winning bids of 2008 now excellent bargains.
If there were doubts on the brand value of the Indian Premier League (IPL) cricket tournament, they were put to rest in Chennai on Sunday. The auction of two new teams for the fourth season in 2011 fetched IPL well over Rs 3,000 crore. And, the action has just begun.
On Sunday, the sale of the two new franchises — for Pune and Kochi — made IPL richer by $703 million (Rs 3,235 crore). The existing eight teams had been sold for Rs 3,330 crore in 2008.
A Brand Finance research report states that IPL's branded business value in 2010 doubled to $4.13 billion (Rs 18,998 crore) from $2.01 billion (Rs 9,245 crore) a year earlier. Chennai Superkings has been ranked the most valuable IPL franchise, at $48.4 million (Rs 222.6 crore). Last year, Chennai Superkings was ranked number four, with a value of $39.4 million (Rs 181.2 crore).
A media analysis by India Infoline states that the gross profits of the team owners is expected to be between Rs 19 and Rs 43 crore this year. The fact that the purchase of the teams have contributed significantly to the bottom lines of listed companies is another proof of the success of IPL as a business model. The report says the teams owned by GMR, United Spirits, India Cements and Deccan Chronicle are expected to contribute five-10 per cent of the total profits of these companies.
It is only getting bigger for the T20 cricket tournament, as the overall ad-spend during IPL-3 telecast is expected to rise from Rs 500 crore in 2009 to Rs 700 crore this year. The opening match of this year’s tournament had already got the highest TV ratings in its three-year history. IPL has also managed to sign partnership deals with 90 companies and the number seems set to go up next year.
Speaking about the valuation that the two new teams commanded on Sunday, Raghu Iyer, CEO, Rajasthan Royals, said, “We bought our team for $67 million and it now seems we got it at a bargain price. Now, all the teams would be valued at similar prices, because the product remains the same. Already, our team valuation has gone up some three times of what we bought it for, according to some independent research data in the public domain. As the new teams become more valuable, at least during the auction process, the experienced teams’ valuation would automatically go up.”
| THE SHOW RUNNERS | ||
| Existing teams | Winning bidders | Bid price ($ million) |
| Mumbai Indians | Reliance Industries | 112 |
| Royal Challengers | UB Group | 112 |
| Deccan Chargers | Deccan Chronicle | 107 |
| Chennai Super Kings | India Cements | 91 |
| Delhi Daredevils | GMR Group | 84 |
| Kings XI Punjab | Preity Zinta, Ness Wadia, Mohit Burmani | 76 |
| Kolkata Knight Riders | Shah Rukh Khan, Juhi Chawla | 75 |
| Rajasthan Royals | Emerging Media Group, Raj Kundra | 67 |
| Source: India Infoline Research * 2008 figures | ||
Sources among the Mumbai Indians’ sponsors told Business Standard, “We bought the team at $111.9 million, which was the most expensive team in the first IPL season. We knew, then, that the new teams that would come up after us would be even more expensive. It reflects the success of the property and that of the individual franchisees.”
A spokesperson of Kolkata Knight Riders said, “The value of IPL itself has doubled, so the auction price was expected to be high. However, the good news for us is that these valuations will also push the brand value of existing teams.”
