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IPL media rights auction: Windfall for teams and their valuations

The IPL media rights for 2023-27 fetched the BCCI a record Rs 48,390 crore, making the Indian T20 cricket tournament among the most-valued sporting leagues in the world in terms of per match value

Mumbai / June 15, 2022 / 04:43 PM IST
 
 
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No threat of a recession, rising interest rates or tightening global liquidity can touch the planet that is the Indian Premier League (IPL).

Now in its mid-teens, the league raked in a record sum for the rights to broadcast matches for the next five years, putting it firmly among the top sports leagues such as US’ NFL and English Premier League when it comes to cost per match.

The record-breaking bidding for media rights that concluded on June 14 will fetch the Board of Control for Cricket in India (BCCI) Rs 48,390 crore.

Disney Star retained the television rights for IPL, the world’s richest cricket league, for Rs 23,575 crore, while Viacom18 secured the digital rights for Rs 20,500 crore.

Viacom18, a broadcasting joint venture run by Reliance Industries, also secured non-exclusive international rights for Rs 3,257.5 crore, while Times Internet picked rights for international broadcast for some regions.

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The biggest beneficiaries of the record-setting auction, which was spread over three days, would be the teams that draw the best global talent and have a worldwide audience.

Going by BCCI’s previous statement on revenue sharing from the broadcasting rights, franchises have a right to 40 percent of the revenues, with the rest staying with the board.

In a 2017 interview, then treasurer Anirudh Chaudhry told the Indian Express that BCCI shares 50-50 of the broadcast revenue. “But they have to pay BCCI 20 percent of their revenues. 20 percent of 50 is 10 percent, so that’s how it becomes 60 to us and 40 to them. This is leaving all the taxes aside,” Chaudhry told the newspaper.

Rich get richer

With the above numbers in mind, each IPL team is likely to earn Rs 387.1 crore a year solely from the media rights, a 137.5 percent jump from Rs 163 crore a year. Further, the teams finishing among the top four in every edition will get another 10 percent share of the media rights sales.

The windfall will substantially shore up the topline of IPL teams. For instance, Reliance Industries-owned Mumbai Indians, the highest valued franchise in the league, reported sales of Rs 317 crore in 2020-21.

For IPL teams, media rights are the bread and butter as they account for 69-75 percent of revenue. Other sources of revenue include sponsorship deals and several tournament-linked incomes.

For Chennai Super Kings, media rights accounted for 75 percent of revenues in 2020-21, while sponsorships made up for 24 percent of the pie.

breakdown-of-revenue-of-ipl-teams

A significant jump in the revenues of the IPL teams will also reflect in their valuations, said analysts.

Brokerage firm Elara Securities expects the minimum valuation of an IPL team to jump to $1.2 billion, as it believes these teams could be valued at 14-15.5 times their forward market capitalisation-to-sales. Currently, Mumbai Indians is valued at around $1.3 billion, according to Elara Securities.

The lowest valued IPL team Gujarat Titans, at $747 million, could see a 60 percent jump in its valuation, according to Elara Securities. Gujarat Titans debuted this season and went on to win the tournament. Similar upward revision is likely for other teams, given the improvement in their earnings going ahead.

That said, the Elara Securities is of the view that the base valuations of an IPL team could move higher or lower by 15 percent based on the players’ profile in the team, higher sponsorship revenue and qualification in the play-offs.

Among the listed companies, Sun TV Network, Reliance Industries, and United Spirits will get a bump in their market capitalisation because of the improvement in market value expected in the IPL teams owned by them, said analysts. Sun TV  owns Sunrisers Hyderabad and United Spirits Royal Challengers Bangalore.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

Chiranjivi Chakraborty
first published: Jun 15, 2022 10:52 am
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