Cricket rights will bowl India Inc a new line-up

Few major sporting tournaments in the world are dominated by tycoons and companies as much as Indian Premier League cricket. This weekend’s auction of the competition’s broadcast rights for the next five years could fetch as much as $6.5 billion, three times what Walt Disney’s Star India paid in 2017. That will probably end up multiplying the parallels between the league and corporate India too.

The 15-year-old IPL is a flashy affair played between 10 teams during the hottest two months of the year in a country where star player salaries are starting to rival the English football Premier League, on a pro-rata basis. A crowd of some 100,000 people turned out for the final in late May at the Narendra Modi Stadium, named after the prime minister. They saw European buyout firm CVC’s new team, the Gujarat Titans, beat the Rajasthan Royals to win the title in its debut season.

CVC’s entry into the game makes the IPL an uncanny reflection of the changing face of corporate India: Buyout firms are finding more opportunities, indebted tycoons are losing their prize assets, Chinese capital is unwelcome, and a few billionaires are gaining extraordinary power at the expense of competition.

Take the ownership journey of the Royal Challengers Bangalore. Global distiller and beer giant Diageo inherited the team when it acquired control of United Spirits nearly a decade ago from beer baron Vijay Mallya, the poster child of India’s bad debt crisis. RCB is now perhaps worth about one tenth of the listed Indian parent’s market value. Of course, having a team carry the name is a helpful way to promote its Royal Challenger whisky in the face of a liquor advertising ban.

Corporate parallels extend to sponsorship too. Chinese handset brand Vivo in January walked away early from its title sponsorship of the tournament as New Delhi raised the barrier to capital from the People’s Republic. That made room for India’s Tata conglomerate to step up.

Just as in the country’s stuffy conglomerates, there’s clear value to unlock from rejigging ownership. More than one-third of the league’s teams are non-core businesses sitting within publicly traded companies. In addition to Diageo’s Royal Challengers, Mukesh Ambani’s $240 billion Reliance Industries is owner of the Mumbai Indians, the $2.2 billion Sun TV Network owns the Sunrisers Hyderabad and the $650 million India Cements is the roughly 30% shareholder of the unlisted Super Kings.

FINANCIAL SIXES

The IPL's solid financial structuring helps tycoons justify owning such trophy assets through their listed vehicles. The small number of franchises, team salary caps, aggressive advertising after every six balls bowled, and the absence of relegation risk help teams generate a healthy bottom line; seven teams generated a net profit margin of between roughly 10% to 20% in the year to March 2021 at the height of the pandemic when ticket sales were disrupted. The tournament’s short duration helps as franchises have no need to spend big on their own stadiums.

With merchandise sales in India still in its infancy, some 70% of team revenue depends on the broadcasting rights. Each franchise ultimately keep about 40% of the headline amount and the Board of Control for Cricket in India takes the rest. Disney faces stiff competition to retain the rights. India is the fastest-growing hub for the House of Mouse but losing the IPL could force the US company’s boss Bob Chapek to kiss his subscriber gains goodbye. Likely contenders include Reliance, Sony, Indian broadcaster Zee, Alphabet’s Google, and Amazon.

Whoever wins, the auction is set to boost team earnings and could prompt some corporate owners to put teams on the block. The Sunrisers are worth more than one third the market value of Sun TV based on the award of two new franchises in October which expanded the league to 10. CVC’s acquisition of one of them set the floor price at $725 million at current exchange rates.

Elsewhere, shareholder Kotak Mahindra Bank is keen for the privately held Chennai Super Kings to go public as a focused standalone listing, following in the footsteps of English Premier League football team Manchester United, listed in London and New York, or Serie A team AS Roma. The Royal Challengers’ enthusiastic recent expansion into cafes, online fitness, apparel, non-fungible tokens and plant-based meat is a ramp-up that suggests Diageo is at least thinking about getting bang for its buck.

As and when teams bat themselves into new shape, any remaining corporate quirks of the IPL will look even more out of place. Reliance, especially, will be in the spotlight. It’s the favourite to win the TV rights, which are a prize target for its broadcast joint venture with New York-listed Paramount Global and backed by media veteran James Murdoch; Viacom18 has been building up to this moment, snapping up rights for major competitions including the 2022 Fifa World Cup, the US National Basket Association and Spain’s La Liga.

Of course, that will leave Ambani’s conglomerate owning both the cricket rights and the Mumbai Indians, the most successful IPL team. Such concentration of power may not hurt the game but it’s the least flattering reflection of corporate India in the league. As the IPL rises in global prominence, cricket authorities might want to avoid having to bat on such a sticky wicket.

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)

CONTEXT NEWS

The Board of Control for Cricket in India will open an e-auction for the Indian Premier League broadcasting rights for the next five years through 2027 on June 12.

[Editing by Antony Currie and Katrina Hamlin]