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IPL teams become hot commodity

IPL teams become hot commodity
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First Published: Wed, Feb 10 2010. 11 51 PM IST
Updated: Wed, Feb 10 2010. 11 51 PM IST
New Delhi: As the Twenty20 format Indian Premier League (IPL) cricket tournament draws closer, the buzz around team owners selling partial or even full stakes in their franchises gets stronger. Leading the pack are Kings XI Punjab and Delhi Daredevils, which are reported to be in advanced discussions with prospective investors.
Although two-wheeler maker Hero Honda Motors Ltd officially denied Wednesday morning’s media report that it was buying out Kings XI Punjab for $260 million (Rs1,212 crore), the team—owned by a consortium of investors, including Ness Wadia, Preity Zinta and Mohit Burman—did not dismiss the possibility of a stake sale completely.
“We are on the lookout for serious investors and have been in discussion with several interested parties, including two to three foreign entities,” said Burman, board member of Dabur India Ltd and director and co-owner of Kings XI. “But we have not finalized anything. There is nothing on paper.”
The third edition of IPL will start on 12 March.
However, an executive of a firm that has a long association with cricket and advertises heavily in the game, said that it was also in the race for buying out Kings XI. “But we may have lost out to an international company that is said to be buying a controlling stake in the team for $200 million.” The executive requested anonymity since it is a sensitive issue
Kings XI Punjab rejected the report in an official statement.
“Hero Honda has not bought KXIP. Hero Honda and Mohit Burman have gone on record denying this rumor,” the firm said. “The promoters of Kings XI Punjab firmly deny the speculative reportage in the media on their stake sale. At the time of the release of this statement, Kings XI Punjab continues to be co-owned by a consortium, which includes industrialists Mohit and Gaurav Burman, Karan Paul, Ness Wadia and leading Indian actor Preity Zinta.”
Shares of publisher Deccan Chronicle Holdings Ltd, owner of Deccan Chargers, surged after the report that Kings XI Punjab had been sold, prompting speculation the firm’s valuation may increase. The stock rose 4.9% to Rs152.30 on the Bombay Stock Exchange.
Meanwhile, Delhi Daredevils is looking to sell a 30% stake and is in talks with investors, confirmed a senior executive from the IPL franchise owned by GMR Holdings Pvt. Ltd, an infrastructure and construction firm. The executive, who did not want to be named, declined to disclose names of the firms interested in picking up stakes. A senior executive belonging to another IPL team pointed out that Hero Honda could be the likely candidate to sign up with the Delhi team, “given that the two-wheeler giant already has a close association with the team as its title sponsor”.
Vivek Siyal, head of marketing at Hero Honda Motors, did not comment on the firm’s plan to buy any specific team.
“Mr Munjal (Pawan Munjal, managing director and chief executive of Hero Honda) is very keen on buying an IPL team as he has previously stated in interviews,” Siyal said. “While I cannot comment on what plans we have specifically for IPL, it is obvious that owning a team will do very good for a brand which is as involved in cricket as we are.”
The executive from another team cited earlier said firms such as Sahara India Pariwar, Godrej Group and Bharti Airtel Ltd are also eager to pick up stakes in IPL teams. While the Bharti spokesperson said the firm did not have any interest in buying an IPL team “at this point”, Godrej Industries Ltd did not respond to Mint’s queries. A spokesperson for Sahara group, however, did not rule out the possibility of buying a stake in an existing team if it fails to get one of the new IPL franchises up for auction soon.
“Our first priority is to bid for a new IPL team and depending on the location and how financially viable it will be, we will decide the next step,” said the firm’s spokesperson. “Our interest in owning an IPL team will be clearer once the tender documents for new teams are made available.”
Not everyone thinks it is the right time to sell equity in team franchises. A person who was closely involved with drawing up the IPL format when it was launched said owners should wait till the new team auctions take place before putting their equity or teams on the block. “It will be stupid to sell at this stage—that is, before the auction for new teams. The auction will indicate the valuations and the existing teams can then cash out and sell stake at a premium,” he said.
Asked what business sense it makes to bid for an IPL team at a base price of $225 million, the person, who didn’t want to be named, said sceptics had raised similar issues when the teams were sold at $50 million.
“There could be two reasons to buy an IPL franchise. One, it’s like any trophy purchase,” he said. “You buy a team because you have the money and it is good for the image of your brand.” Two, it is a good value investment. “At least four teams made a profit last year. So there will be capital gain over the years. Eventually, there will be a scarcity premium on these teams.”
Industry experts say even Rajasthan Royals and Kolkata Knight Riders are evaluating offers from investors. “Investors have approached us, but we are not considering any change in structure for at least six months,” said Joy Bhattacharjya, director of the Kolkata team. Rajasthan team officials could not be reached for comment.
The hectic negotiations on buying and selling notwithstanding, it is the Board of Control for Cricket in India, the governing body behind IPL, which will have the final say on whether or not a team can change ownership. “I don’t know who’s in talks with whom, but if the ownership of any IPL teams has to change hands, it can only be with the approval of the IPL governing body,” said Rajiv Shukla, member of IPL governing council.
Shuchi Bansal contributed to this story.
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First Published: Wed, Feb 10 2010. 11 51 PM IST