| MUMBAI:
For the Indian Premier League (IPL) team owners, the stage is set for higher valuations,
fatter revenues and attractive equity deals. The
cause for all this: a $225 million floor price fixed by the IPL for bids to own
two new teams. In
2008, Mukesh Ambani's Reliance had forked out $111.9 million to get Mumbai Indians.
In 2010, the bidder for a team franchisee will have to cough out more than double
of what was paid by the most expensive winner two years back.
"The
benchmark is being set by the recently announced floor price. For the existing
team owners, there will be a huge upside in valuations," says the head of
a IPL franchisee. A
big gainer would be Emerging Media that had paid $67 million, the lowest among
the existing eight team owners, for Rajasthan Royals. Revenues
for the team franchisees will also see an upside as the number of matches scale
up to 94 in 2011. "We will gain as the format becomes longer," the senior
executive says on request of anonymity. So
could it be fertile ground for equity deals? "Absolutely. Valuations can
look attractive," says an investment banker. Not
everybody, however, is ready to cash in at this stage. "The valuation, undoubtedly,
goes up. But we are not looking at diluting stake," says Deccan Chronicle
Holdings managing director PK Iyer. India
Cements, the owner of Chennai Super Kings, is also not willing to hive off its
IPL property from the listed company. "We prefer to capture value of the
IPL property inside India Cements. We are not going to move it outside,"
says a source in the company. But
will there be takers at $225 million upwards? Many find the price within 'right
range.' Says
Percept Joint MD Shailendra Singh, "The IPL is seen as a solid investment
proposition by those who have deep pockets. While the breakeven period might be
extended, the IPL has to be seen as a long term activity. The interest in this
format is rapidly growing. Going forward, you will see a solid business plan being
activated as more innovations come in."
According
to Relay Worldwide India GM Mahesh Ranka, the base price is on par with what was
expected. "Companies are encouraged by what the IPL has delivered and what
it promises. What the base price will do, though, is keep out people who are not
serious. It will also keep out people whose funding is not strong." Besides
corporates and private equity funds, consortiums could be formed. Agrees Singh,
"This could be the best way to go about as there would be pressure on any
single entity to raise hundreds of millions of dollars. If the current franchises
are taking three to four years to breakeven, then I would expect the new franchises
to achieve this status in six to seven years." | 
