The BCCI is all set to acquire assets worth at least Rs 4000 crore as some top business houses are set to bid aggressively for the five Women’s IPL (WIPL) teams that will be auctioned on Wednesday.
According to market experts, the teams are expected to pay in the range of “500 to 600 crore rupees” per team in the closed bid auction.
An industry insider, who has previously worked on men’s IPL team bids, told PTI ahead of the auction, “WIPL has huge potential, but most older teams would like to mix optimism with pragmatism.”
“Expect some bids in the range above Rs 500 crore. The amount of over Rs 800 crore might be a bit ambitious but the BCCI will not complain.
Over 30 companies have bought bid documents worth Rs 5 lakh including all 10 men’s IPL teams. Renowned corporate houses like Adani Group, Torrent Group, Haldiram’s Prabhuji, Capri Global, Kotak and Aditya Birla Group have also shown interest in buying a team.
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Some of these companies were unsuccessful when the BCCI invited bids for two new men’s teams in 2021.
Among the traditional IPL teams, Mumbai Indians, Rajasthan Royals, Delhi Capitals, KKR could be seriously considered to add to their already existing bouquet of men’s teams around the world.
According to market experts, business houses bid on the basis of two principles.
The first is “Return on Investment” (ROI), which is a fundamental principle of any business. It is the profit on what a unit costs.
There is no other business principle, but in the business community they call it “the return of the ego”.
This is something where some of the biggest business names are ready to pay any amount to have their eye on buying a particular property. Even if it takes five to seven years to touch the break even point.
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it is about the desire to buy something at any cost
An existing IPL franchise with its “steady revenue stream” can afford to “bleed” a bit more in the initial years than is inevitable.
A former IPL franchise official who once worked on the bids explained the rationale behind the bid.
“Suppose, a franchisee makes a winning bid of Rs 500 crore for a period of five years. Now it has committed Rs 100 crore directly each over the next five years,” explained the source.
Now what will be the source of income for the franchisee?
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“BCCI distributes its media broadcast revenue which forms the major part of the earnings. The second is a share from the BCCI’s central pool of sponsorship. Third is a franchise’s own set of sponsorship earnings. The fourth is gate sales, money earned from tickets,” he elaborated.
So what can the franchisee earn from WIPL’s media revenue pool.
“BCCI is going to share 80 per cent of the media rights money with the teams in case of women’s IPL (in case of men, it is 50:50) to help them develop a sustainable model.
“So what will be the math here? JIO has brought media rights at Rs 950 crore (approx) for five years which is approximately Rs 190 crore per annum. So 80 percent of 190 crores is 152 crores.
“Let’s make it a round figure of Rs 150 crore. This is what each franchisee gets over a period of five years, which is around Rs 30 crore per year.”
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“Now BCCI will also distribute a part of its central pool of sponsorship (title sponsor, co-sponsor, various award sponsors) with the franchises. Add to this the franchise’s own revenue pool. So it can be anything between 15 to 18 crore rupees per annum. You won’t earn much in the first year from the sale of the gate.”
So the earning per annum for a team is expected to be Rs 50 crores.
Now apart from the franchise fee of Rs 100 crore every year, what else will be spent.
“There is a salary cap of Rs 12 crore for the squad. Add an additional 6 to 8 cr on the salary of the support staff. Let’s make it Rs 20 crore. Add hotel expenses, fees paid to state associations for the stadium, and other operating costs. It can be anything between Rs 6 to 8 crores. There will be a reduction in single city expenditure in the first year.
“So the cumulative expenditure per year could be Rs 128 to Rs 130 crore. The earning will be around Rs 50 crore. So there is a possibility of a loss of Rs 50 crore or more during the first few years.”
Here’s the catch.
“The legacy franchises (MIPL) are in a better position to make up for these losses as they are already making profits after 15 years of IPL. They will keep their men’s and women’s teams together and probably quickly turn a profit zone,” the official said.
The five-team WIPL will be played at two venues in Mumbai in the month of March.
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(This story has not been edited by News18 staff and is published from a syndicated news agency feed)