Franchise values in the world’s top cricket league are surging, outpacing the growth in even the NFL and the NBA.
The Indian Premier League has been a gold mine for investors.
In 2009, a year after the franchise-owned cricket league launched, Forbes published its first (and only) valuations of the league’s teams, pegging the average value of the eight franchises at $67 million. With the league having recently expanded to ten clubs, that average is now up to $1.04 billion, an annualized growth rate of 24%.
By contrast, over the past 13 years, the growth rate has been 10% for NFL team values (to $3.48 billion) and 16% for NBA team values (to $2.48 billion). And the IPL’s most valuable franchise, the $1.3 billion Mumbai Indians, is now worth more than six MLB teams, 27 NHL teams and every MLS team.
“The IPL is the most prominent cricket league in the world in terms of attracting sponsors and media rights,” says Ajimon Francis, managing director at Brand Finance India, a brand valuation and strategy consultancy. “A lot of credit goes to founders of the IPL, who took ideas from the NBA and European soccer leagues, and good governance by the BCCI with regards to clear visibility of team funding and ensuring the tournament continued during Covid.”
“The IPL is the most prominent cricket league in the world in terms of attracting sponsors and media rights.”
Transaction prices illustrate the rise in the valuations. The Deccan Chargers were thrown out of the IPL in 2012 for failing to pay their players, but they were soon replaced by the SunRisers Hyderabad in a deal that saw Sun TV pay more than double what Deccan Chronicle Holdings had paid for the team in 2008. In 2018, when JSW Group nabbed a 50% stake in the Delhi Daredevils from GMR Group, the cricket team (now the Delhi Capitals) was valued at $169 million, twice the amount GMR paid.
Private equity has recently taken notice. In June, RedBird Capital, which owns nearly 11 % of Fenway Sports Group, bought a 16% stake in the Rajasthan Royals at a valuation slightly above $200 million.
“There is a lot of excitement from investors looking to invest in the IPL,” says Karan Taurani, senior vice president at investment bank Elara Capital, who specializes in research on the media and entertainment industries.
The average expansion fee paid by the original eight owners in 2008 was $90 million. (Forbes’ initial values were lower because the fees were paid over several years.) Last October, the IPL sold two expansion teams: CVC Capital paid around $750 million for the Gujarat Titans, and Sanjiv Goenka purchased the Lucknow Super Giants for about $950 million. The expansion fees will be paid over ten years and redistributed in equal amounts to the other eight teams.
There are two big reasons for the surge in IPL valuations.
First, the IPL draws a massive viewing audience and is must-have content in India. Last season, 400 million watched on television, and another 260 million streamed matches. This is the last year of the IPL’s media deal with Walt Disney subsidiary Star India, which is paying the league $2.4 billion over five years for television and streaming rights. The expectation is that the next round of media rights will be worth $6 billion to $7 billion over five years. Explains Taurani, “Males make the spending decisions in Indian households, and 60% of the viewing audience of the IPL are male.” Forbes’ values for the Super Giants ($1.08 billion) and the Titans ($850 million) are higher than their expansion fees because the IPL’s next media deal was anticipated to be worth at most $5 billion when the two new teams came aboard.
Second, the IPL’s economic model virtually guarantees that every team is profitable. In 2021, for example, average revenue for the eight teams was $35 million, with operating income (earnings before interest, taxes, depreciation and amortization) of $9 million.
Some 80% of the IPL’s revenue in a typical year—and about 90% during the pandemic—is derived from central revenues negotiated by the Board of Control for Cricket in India, or BCCI, the sport’s national governing body. That pot consists of the league’s central media rights agreement with Star India, which paid $440 million in 2021, and its central sponsorships, which were worth $58 million in 2021.
According to Elara Capital’s Taurani, 45% of the central revenue was shared equally among the IPL’s eight teams in 2021; for comparison, the NFL and the NBA equally share about 60% and 40% of their revenues, respectively. In addition, 5% of the central revenue was doled out to the IPL’s four playoff teams—the champion Chennai Super Kings, the Kolkata Knight Riders, the Delhi Capitals and the Royal Challengers Bangelore—based on their performance. The BCCI keeps the other 50% of central revenue. Only about 20% of revenue comes from individual team sponsorships, tickets to matches and merchandise.
In addition, the IPL has a salary cap that keeps player payrolls (slightly less than half of operating expenses) at no more than 35% of revenue; that’s much lower than in the NFL (48%) and the NBA (51%). That helps explain why each of the eight IPL teams that played in 2021 was profitable even as matches had no fans in attendance, with Covid-19 depriving the clubs of the $3 million to $4 million they each typically collect in ticket revenue.
The revenue sharing results in a narrow range in team valuations, with the pecking order largely determined by market demographics and success on the pitch. The most valuable team—the Mumbai Indians, at $1.3 billion—has won the most IPL titles (5) and plays in the financial capital of India, in a state that ranks second in the country in total population (135.7 million) and first with its number of Forbes-certified billionaires (58).
The list’s diamond in the rough is the Royal Challengers Bangalore, ranked sixth at $1.04 billion. The Royal Challengers play in India’s IT capital, and their state has the third-most billionaires (22) among IPL teams. But they have never won an IPL title. “The team hasn’t reached their potential in terms of merchandise and endorsement revenue due to their performance on the pitch,” notes Brand Finance’s Francis.
The thinking here is that IPL team values will see solid appreciation over the next several years as non-media revenue streams increase. Central sponsorship revenue, for example, is expected to top $100 million in 2022, and analysts believe NFT deals and a video game (both as part of central revenue) will push up sponsorship revenue even further, as they have with U.S. teams. There is also considerable potential in licensing and merchandising as the league, consumers and the state get a better handle on piracy.
THE IPL’S MOST VALUABLE TEAMS 2022
1. Mumbai Indians
• Value: $1.3 billion
• Revenue: $33 million
• Operating Income: $5.5 million
• Owner: Reliance Industries
2. Chennai Super Kings
• Value: $1.15 billion
• Revenue: $41.2 million
• Operating Income: $14.8 million
• Owner: India Cements
3. Kolkata Knight Riders
• Value: $1.1 billion
• Revenue: $41.2 million
• Operating Income: $14.1 million
• Owner: Shah Rukh Khan
4. Lucknow Super Giants
• Value: $1.075 billion
• Revenue: N/A
• Operating Income: N/A
• Owner: RP-Sanjiv Goenka Group
5. Delhi Capitals
• Value: $1.035 billion
• Revenue: $35.4 million
• Operating Income: $8.3 million
• Owner: GMR Group, JSW Group
6. Royal Challengers Bangalore
• Value: $1.025 billion
• Revenue: $36.4 million
• Operating Income: $9.7 million
• Owner: United Breweries
7. Rajasthan Royals
• Value: $1 billion
• Revenue: $31.7 million
• Operating Income: $6.6 million
• Owner: Emerging Media Ltd.
8. SunRisers Hyderabad
• Value: $970 million
• Revenue: $31.8 million
• Operating Income: $3.2 million
• Owner: Sun TV Network
9. Punjab Kings
• Value: $925 million
• Revenue: $31.2 million
• Operating Income: $9.8 million
• Owner: Mohit Burman, Ness Wadia, PZNZ Media
10. Gujarat Titans
• Value: $850 million
• Revenue: N/A
• Operating Income: N/A
• Owner: CVC Capital Partners
Revenue and operating income (earnings before interest, taxes, depreciation and amortization) are estimates for the 2021 season and were converted to U.S. dollars based on the average exchange rate for that season (1 INR = 0.0135 USD). Enterprise values (equity plus net debt) are based on historical transaction prices, revenue prospects and market demographics and were calculated using the exchange rate as of April 12, 2022 (1 INR = 0.0131 USD). Forbes’ figures are based on team documents as well as conversations with team owners, analysts and sports bankers.
With additional research by Justin Teitelbaum.
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