Valuation Mismatch In Rs 31,000 Crore-Plus Deals For RCB And RR? Expert Says: "Very Difficult To Understand"
On March 24, two prominent Indian Premier League (IPL) franchises - Royal Challengers Bengaluru and Rajasthan Royals - changed hands. Both teams have been IPL participants since 2008
- RCB was sold to Aditya Birla Group-led consortium for Rs 16,700 crore while RR was bought for Rs 15,290 crore
- D&P Advisory has said the revenue generation by the IPL teams and the cost of the sides creates a mismatch
- The valuation provider added that the cost at which RCB and RR were sold was "very difficult to understand"
On March 24, two prominent Indian Premier League (IPL) franchises - Royal Challengers Bengaluru and Rajasthan Royals - changed hands. Both teams have been IPL participants since 2008. A consortium led by the Aditya Birla Group (ABG) emerged as the lead bidder to acquire RCB for a whopping USD 1.78 billion (approximately Rs 16,700 crore). Earlier, RR was acquired by a US-based Kal Somani-led consortium for USD 1.63 billion (approximately Rs 15,290 crore). Combined, the two franchises generated bids worth over Rs 31,000 crore.
The IPL, in the last 18 years, has grown into a sports giant. It is the richest cricket tournament in the world, with money and interest comparable to major sporting events globally. Yet, the staggering amount at which RCB and RR were sold has raised questions in the minds of some experts.
Santosh N, managing partner at D&P Advisory, in an interview with The Indian Express, said the valuation of the two teams was "difficult to understand" after the Torrent Group acquired Gujarat Titans at a value less than a billion dollars.
"So in a year, it is almost like a double valuation. And what has happened in that one year is actually only negative for the IPL - the real-money gaming ban, the broadcasting rights renewal has not happened in this one-year window, no new title sponsorship deals, none of the marquee deals have happened for IPL. And in spite of that, we have seen this double valuation. That is something that is very, very difficult to understand," Santosh said.
He went on to elaborate, with a specific focus on revenue. "Rs 500 crore comes from central pool revenue, which is the broadcast money. And each team has anywhere around Rs 200 to Rs 300 crore of sponsorship, ticketing, and merchandise revenue. So we are talking about Rs 700 to Rs 800 crore sort of revenue, which is less than a hundred million dollars - and yet these teams are getting valued at around 1.7 billion dollars, which is almost 20x revenue," he said.
Regarding the sale of RCB - now the costliest IPL franchise - a source close to the development informed PTI: "The consortium has reached an agreement with United Spirits Limited (USL) to buy 100 percent stake in RCB, and the deal includes both the men's and women's teams of the franchise."
United Spirits Limited, a subsidiary of UK-based Diageo, was keen to move away from RCB as the team was not central to their business plans.
As per the sale agreement, Aryaman Vikram Birla, ABG's director, will be the chairman of RCB, while Satyan Gajwani of Times of India will serve as his deputy.
However, formalities such as ratification from the BCCI, IPL Governing Council, its WPL counterpart, and the Competition Commission of India are still pending
Royal Challengers Bengaluru
Rajasthan Royals