Just a cursory look at the deal signed by the two new Indian Premier League (IPL) franchisees – Pune and Rajkot – gives a clear impression that it does not make financial sense for the two successful bidders.
To begin with, unlike the other teams, both Pune and Rajkot will not be making any money from the central revenue pool.
The BCCI used a reverse bidding process with a base price of 400 million rupees ($6m). If a team won the bid at that amount, the IPL would have paid them $6m from the pool.
Instead, both Pune and Rajkot were purchased at a negative price – (-160m rupees or -$2.4m for Pune and -100m rupees or -$1.5m for Rajkot). That means the owners are going to pay that much money to the IPL instead of getting any part of the central revenue. The other franchisees are expected to earn 700m rupees ($10.5m) for the 2016 edition.
Including the payment to the BCCI, and the 660m rupees ($10m) cap on players’ salary, a very conservative estimate is that annual expenses for these franchisees are going to be approximately 1,000m rupees ($15m).
Secondly, both teams have a life span of only two years – equivalent to the length of the suspension being served by Chennai Super Kings and Rajasthan Royals. That is hardly any time frame to build up a team, or a brand. There is a real danger that most decisions by the owners will be keeping the two year horizon in mind, instead of being visionary and focusing on the long-term future of the teams.
Then there is the fact the teams have less than six months to prepare for their first tournament, and even less considering the players’ auction is scheduled for February 6. That gives the teams exactly two months to get ready for the tournament which starts on April 8.
Perhaps not enough time to plan and execute sponsorship and marketing efforts, but Sanjay Bansal, managing director of Intex Technologies, thinks it is money well spent.
“When this opportunity of owning an IPL team was presented to us, there were two ways of looking at it – either we saw everything negative associated with it and let it go, or make the most of it. We decided to do the latter,” said Bansal, one of four brothers who own Intex.
“I will not say it is a complete business decision, because we are all passionate about cricket. We wanted to own an IPL team, but we are also confident that it makes good business sense.
“We desperately wanted to win. We bid for three cities and we were hoping to get Rajkot, so that was our lowest bid. After speaking to various people in the market, we had a feeling that the winning bids would be in minus figures. We were proved right and even Pune was snapped up for a minus figure.”
Intex have been associated with the IPL for the last three years. They were the team sponsors of Rajasthan Royals and, in 2015, they were one of the main presenting sponsors of IPL broadcasts in India.
Known as India’s fastest-growing mobile handset company, Intex’s remarkable story of less than two decades (they were established in 1996) reached a dramatic high when they become the No1 handset seller in India last November.
Intex’s turnover during 2014-15 was $600 million, which they are hoping to more than double to $1.5 billion by the end of 2015-16.
And Bansal believes it is no coincidence that the exponential growth of his company and their association with the IPL started at almost the same time.
“I think the IPL is a fantastic product. We have been associated with the tournament for some time and we feel it helped us connect with the right target audience,” said Bansal, whose nephew Keshav is expected to head the operational aspects of the new team.
“From our previous association, we know it works for us. Obviously, IPL is not the only reason why we have become the No1 handset company in India. We have a big tie-up with the Bollywood actor Farhan Akhtar and we have tried to be very aggressive with our pricing and marketing efforts. Becoming No1 is a result of all-round effort from our company, but cricket and the IPL has played a huge role.”
So how are the Bansals planning to make their investment work?
“We will have to think and plan smartly. Our expenses can go up to 1,500m rupees ($22.5m) or we can bring it down to 900m rupees ($13.5m). We will have to be smart in the players’ auction and in what we do after that,” said Bansal.
“But we were already spending a substantial amount as telecast and team sponsors. Now that we have moved on to bigger things in the IPL, we will cut that down.
“Let’s be honest, who wants to get into a business knowing that he is going to lose money? Obviously, we want to get a return on our investment, but money is not our focus right now.
“We may lose money, but then there is such a huge opportunity to build our brand through India’s hottest sporting property. With our own team, we can do so many promotions for our customers, clients and business partners.
“We have just started the journey. We will have the plans firmed up in the next couple of months. We are also going to do promotional activities in the Middle East, which is a very important market for us.”
Both new teams were given the chance to pick up five players from the two suspended teams, and Pune got the first choice. They went for Chennai captain Mahendra Singh Dhoni, the most valued man in the Indian sports market.
Bansal admitted they would have opted for Dhoni if they had the first choice, but he is equally delighted with Suresh Raina, the man who has scored the most runs in IPL history and played the most matches.
“We would have liked to have Dhoni, and who wouldn’t? He has a huge brand value and we would have benefitted immensely from his association. But we are not disappointed,” said Bansal.
“Raina’s record speaks for him. I think there are not many players who have his level of dedication and commitment and he also has a very shrewd cricketing brain. He will be a very good captain for us.”
On making Rajkot their base – given it’s a small town in the state of Gujarat with a population of less than one million and a relatively small cricket stadium with a capacity of 28,000 – Bansal said: “Our family is from Rajasthan and we were brought up in Delhi. But we could not get those two franchises as they are both gone.
“So, we decided to go for Rajkot. Gujarat is a wealthy state and the people there are extremely mad about cricket. They are going to be great supporters of the team.”
And what about the decision to restrict the period of franchisee to just two years? There is a real danger that all the hard work done over these two years will not mean anything in 2018.
“We are not thinking of that. We are gung-ho about what lies ahead and the only objective is to win the title in these two years and stay part of the IPL. I think it will be difficult to take back our franchise if we win the title,” he added.
Teams from the western cities of Pune and Rajkot will compete in next year’s IPL, replacing Rajasthan and Chennai after they were banned over a corruption scandal.
The Twenty20 tournament’s chairman Rajiv Shukla said that New Rising, a subsidiary of the Sanjeev Goenka group, bagged the Pune franchise, while Delhi-based Intex Mobiles picked up the Rajkot team in Tuesday’s open bidding.
Shukla said the owners had not paid the usual franchise fees to tournament organisers for the right to field teams, but would instead forgo payments from a central pool of money made up of cash from TV rights and sponsorship.
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“This speaks to the enduring popularity of the tournament, that instead of us paying them money they are going to pay us,” Shukla said after the auction in New Delhi.
New Rising have agreed to pay around $3.4 million annually for the Pune franchise for the next two years and Intex will pay around $1.5m for the Rajkot team.
The auction followed the decision by India’s cricket board to ban the Chennai Super Kings and the Rajasthan Royals from the competition for two years on the recommendation of a Supreme Court-appointed panel.
The 2013 IPL season was mired in controversy after police launched legal proceedings against several officials from the two teams and three Rajasthan Royals’ players for illegal betting and spot-fixing.
Five players from each of the Chennai and Rajasthan franchises will be drafted into the new teams on December 15, while the rest will feature in an auction in Bangalore on February 6, Shukla said.
Both Chennai and Rajasthan are expected to return to the IPL after their bans end following the 2017 edition.
2016 edition of the IPL to begin from April 9- May 29.
— IndianPremierLeague (@IPL) December 8, 2015
The vivo IPL auction to take place on February 6 in Bengaluru.
— IndianPremierLeague (@IPL) December 8, 2015
Two new franchises to have draft picks on December 15. Pune will get to pick the players first.
— IndianPremierLeague (@IPL) December 8, 2015
The new buyers have ensured the IPL will remain an eight-team event for at least the next two years.
“We are very excited to be associated with a popular brand like the IPL,” said Intex director Keshav Bansal. “Gujarat is a great cricketing state and the people there are very enthusiastic about cricket.”
The barred Chennai Super Kings, led by World Cup-winning captain MS Dhoni, are the most successful team in IPL history, having won in 2010 and 2011 and finishing runners-up on four occasions.
Rajasthan Royals won the inaugural event in 2008 under the captaincy of Australian spin legend Shane Warne, but have failed to make the final since then.
Subhashish Mitra, Executive Director of New Rising, said: “Our aim is to be associated with the great game of cricket.
“Pune is a great city and we have a very soft corner for it. When we were going through the list of cities available, Pune struck a chord with our mind and we are very glad that we got Pune. We are very proud to have built this association.”
It means IPL cricket returns to Pune for the first time since 2013, when the Pune Warriors India left the tournament due to financial problems.
A crucial Board of Control for Cricket in India meeting was called off on Friday following the presence of controversial former president Narayanswami Srinivasan.
The BCCI working committee meeting was to discuss crucial issues including the fate of two suspended Indian Premier League teams – Chennai Super Kings and Rajasthan Royals – and the appointment of a head coach for the national team.
N Srinivasan, the man who runs world cricket, isn’t allowed to attend BCCI meetings. God bless this sport
— Peter Miller (@TheCricketGeek) August 28, 2015
However, with Srinivasan turning up as a representative of Tamil Nadu Cricket Association, some BCCI members objected to the current International Cricket Council chairman’s attendance owing to the conflict of interest issues and the restrictions imposed on him by the Supreme Court following the IPL corruption scandal in 2013.
BCCI chief Jagmohan Dalmiya adjourned the meeting after consultation with senior officials and legal head Ushanath Banerjee.
“The working committee meeting was adjourned sine die after deciding to seek the opinion of the Supreme Court whether N. Srinivasan could attend the meetings of the BCCI as the authorised representative of TNCA,” BCCI secretary Anurag Thakur said in a statement.
Banerjee revealed the date of the next working committee meeting will be decided after seeking approval from the court ahead of the Board’s annual general body meeting on September 27.
“The Board has taken the opinion of two former judges who were of the view that attendance of Srinivasan may invite contempt of court. So, on the ground of conflict of interest, the meeting was adjourned sine die,” he said.
“TNCA also obtained opinion of a former Supreme Court judge who said Srinivasan can attend the meeting. So to obtain the clarification on the honourable court’s order, the Board decided to adjourn the meeting. The next meeting of the working group will be decided by the Supreme Court and the AGM will be held tentatively on September 27,” he added.