March 2010 saw IPL attracting two big names on their board. The Sahara Group and Rendezvous Sports bought the Pune and Kochi IPL teams respectively. The fact that surprised everybody was the amount splurged skyrocketing the IPL team valuation. Sahara Group won their franchise for USD 370 million while Rendezvous Sports won their franchise for USD 333.33 million. The huge variation in the base price of USD 225 million and the actual bid amount truly indicates the emergence of IPL as a lucrative business proposition. Now the next big question is what is it that’s luring all these renowned, knowledgeable and elite business honchos to take so much interest in a Cricket League?
Just to put things into perspective, Indian Premier League (IPL) started in the 2008. Within a span of three years IPL transformed itself into a success story only a few had imagined. Today IPL’s brand value has more than doubled to a staggering USD 4.13 billion from USD 2.01 billion in 2009 representing Y-O-Y growth of 104 percent in valuation. The table below illustrates the current valuation of the IPL teams.
What impact would such mammoth valuation of smaller cities like Pune & Kochi could mean in comparison to the larger existing franchises would be interesting to know. The high price bids for smaller teams have meant that tier one teams which have larger cities as their base might look at a completely different valuation all together. According to industry sources the enterprise valuation of the tier-I teams are expected to be somewhere around USD 500 million. Moreover, the existing teams would also in all likelihood ask for a premium over Sahara Group's $370-million bid for Pune franchise when striking a deal. Owners of teams like Mumbai, Delhi and Kolkata might ask for higher valuations based on better revenue potential and prominent location. These valuation could be well above USD 500 million as these franchises have better ecosystem bigger fan following and cricket infrastructure in place. If some other factors like popular international player with big valuations are added, the enterprise valuation might just suddenly sky rocket. However, industry insiders believe that in next 2-3 years a more scientific valuation might come through focusing more on revenue potential and operating efficiency of the franchises. There would be proper grading methodology in place for valuing even intangible assets of these franchises. Over a period of time other than fan base, revenue potential and location of the franchises, global fan base and prospective buyers (especially the high networth individuals who are associated to the city) would also assume significant importance.
With many investors queuing up to bite the IPL pie the existing teams would always be keeping their eyes and ears open to simply identify the right time to off-load any stakes. Business conglomerates like Videocon Group and some prominent people from the film fraternity have already made it very clear that they would be interested in buying minority stake in some of the existing teams which again is a good indicator of the vast availability of funds implying growth boosters for the team valuations. Additionally, with every passing day and increasing popularity, more teams are seriously contemplating going public, which in turn would get the fans directly involved with these teams and add a new feather in the cap to the fairly tale saga of IPL.
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