Potential of WPL to garner a scalable viewership is an uphill task: Elara Capital

Mumbai: The BCCI has raked in Rs 4,669.99 crore from franchise bidders for the Women’s Premier League. Adani Sportsline forked out the most amount at Rs 1,289 crore. Three of the winning bidders also own IPL franchises - Royal Challengers Sports (owners of Royal Challengers Bangalore), JSW GMR Cricket (owners of Delhi Capitals) and Indiawin Sports (owned by the Reliance Group, which also owns the IPL franchise Mumbai Indians).

This adds to the Rs 951 crore that the BCCI will get from Viacom 18, which had earlier gotten the broadcast rights for the league.

Elara Capital’s Karan Taurani said that this is a good initiative to target a larger audience pool by leveraging the strength of an existing franchise. "However, the potential of WPL to garner a scalable viewership is an uphill task, in our view, as it also may come around the prime time slot wherein women's audiences are sticky about fiction-based shows and may move toward WPL, only if women cricketers become bigger stars in terms of name and fame.

"We valued men’s IPL teams at an average of Rs 85 billion based on 13-14x one-year forward sales. If we were to assign a 30 per cent lower valuation multiple for WPL, the fair value would be in the range of Rs 2.5-3 billion, which would move up in the long term, bolstered by its success and acceptance. WPL may be the next big thing for advertisers and team owners to target the female audience; however, its success and acceptance are in for the long haul."

Taurani noted that United Spirits and other IPL men’s franchise teams have bought the Women’s Premier League (WPL) team for Rs 9.3 billion. "Valuation seems to be at a premium (30x forward EV/sales), given the below-par monetisation opportunity presented by the lower acceptance and popularity of women’s cricket in India. We believe this investment can pay rich dividends only in the long term, provided women’s cricket attracts a mass following in India."

He noted that, on average, each team was sold for Rs 9.3 billion. This value is higher than the eight men’s IPL teams in CY08 when each team was sold for an average of Rs 5 billion. However, men’s cricket has always had a high recall and attracted a large audience compared to women’s, which is relatively new (the average reach of women’s cricket in India is a mere 20 million versus men’s IPL at 500 million). In terms of recent additions, two new teams (men’s IPL) were added at an average acquisition price of Rs 63.6 billion last year, which means WPL teams’ valuation is currently at 15 per cent of men’s IPL teams.

"In terms of media rights, WPL were sold for five years at Rs 9.5 billion, which is a mere 5% (based on Rs 200 billion – assuming fewer matches) of men’s at Rs 500 billion, if we were to compare it on a like-to-like basis, as WPL is slated to have less than half the number of matches of men’s IPL. In terms of per match cost, men’s IPL media rights were sold for Rs 1.25 billion, whereas WPL was at Rs 47 million (four per cent of men’s), assuming there will be 35-40 matches per season, given fewer number of teams. We believe the valuation of WPL teams is at a slight premium, as it stands at 15 per cent of men’s teams whereas media rights are a mere five per cent of men’s teams. Lower media rights revenue would limit the team’s revenue potential as the former accounts for 80 per cent of a men’s IPL team’s revenue."

Triggers: UNSP already owns RCB, a men’s IPL team franchise, and it has paid Rs 9.05 billion to acquire a WPL team. Given media rights account for a lion’s share of IPL teams’ revenue, the UNSP WPL team may not have the potential to generate more than Rs 0.25-0.3 billion per year (media rights will account for 90% of revenue, as endorsements and ticket revenue may be significantly low for WPL initially), assuming the sharing ratio (largely 50:50) with BCCI is same as men’s IPL. This is well below the men’s IPL team, which was sold for Rs 5.1 billion in CY08 and able to post a revenue of Rs 1 billion in the first year itself.

"Hence, we believe UNSP has paid a premium price for acquiring a team in WPL, which has no recall as on now; however, the factors that work in the company’s favor are: 1) wider target audience to market its brands to women, and 2) an existing recall for RCB as a franchise, which augurs well for the overall branding for the women’s team. Given less revenue potential in the next five years, WNSP WPL team may only generate an ROCE of 13 per cent (annual investment of Rs 0.9 billion and PBT margin assumption of 40 per cent); however, ROCE would improve significantly in the medium to long term only if women’s IPL is accepted in a big way and if media rights revenue has a multiplier impact at the next round of auctions in CY28."