Cricket now has its place among the most valuable sports teams in the world

Franchise values ​​in the world’s top cricket league are rising, even outpacing the growth of the NFL and NBA.


Jhe Indian Premier League has been a gold mine for investors.

In 2009, a year after the launch of the franchise-owned cricket league, Forbes released its first (and only) team valuations in the league, pegging the average value of the eight franchises at $67 million. With the league recently expanding to ten clubs, that average is now $1.04 billion, an annualized growth rate of 24%.

In contrast, over the past 13 years, the growth rate has been 10% for NFL team values ​​(at $3.48 billion) and 16% for NBA team values ​​(at $3.48 billion). $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 biggest cricket league in the world in terms of attracting sponsors and media rights,” says Ajimon Francis, Managing Director of Brand Finance India, a brand valuation and strategy consultancy. “Much of the credit goes to the founders of the IPL, who took ideas from the NBA and European soccer leagues, and the good governance of the BCCI in terms of clear visibility of the funding of the team. and the continuation of the tournament during Covid.”


“The IPL is the most important cricket league in the world in terms of attracting sponsors and media rights.”

Francois Ajimon


Transaction prices illustrate rising valuations. Deccan Chargers were kicked out of the IPL in 2012 for failing to pay their players, but they were soon replaced by 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 acquired a 50% stake in the Delhi Daredevils from GMR Group, the cricket team (now the Delhi Capitals) was valued at $169 million , which is twice the amount paid by GMR.

Private equity recently took notice. In June, RedBird Capital, which owns nearly 11% of Fenway Sports Group, bought a 16% stake in the Rajasthan Royals at a valuation just over $200 million.

“There is a lot of enthusiasm from investors wanting to invest in the IPL,” says Karan Taurani, senior vice president at investment bank Elara Capital, which specializes in research on the media and entertainment industries. entertainment.

The average expansion fee paid by the eight original owners in 2008 was $90 million. (Forbes’ initial values ​​were lower as fees were paid over several years.) Last October, the IPL sold two expansion teams: CVC Capital paid around $750 million for Gujarat Titans and Sanjiv Goenka bought the Lucknow Super Giants for around $950 million. The expansion fee will be paid over ten years and redistributed equally to the other eight teams.

There are two big reasons for the spike in IPL’s valuations.

Firstly, IPL attracts a massive audience and is must-have content in India. Last season, 400 million matches were watched on television and 260 million matches were streamed. This is the final year of the IPL’s media deal with Walt Disney subsidiary Star India, which pays the league $2.4 billion over five years for television and broadcast rights. continued. The next round of media rights is expected to be worth $6-7 billion over five years. Taurani explains, “Men make the spending decisions in Indian households, and 60% of IPL viewers are men.” Forbes’ the values ​​of the Super Giants ($1.08 billion) and Titans ($850 million) are higher than their expansion fees, as the next IPL media deal was expected to be worth no more than $5 billion when the two new teams have arrived on board.

Second, the IPL’s business model virtually guarantees that every team is profitable. In 2021, for example, the average revenue of the eight teams was $35 million, with operating income (earnings before interest, taxes, depreciation and amortization) of $9 million.

Around 80% of the IPL’s revenue in a typical year – and around 90% during the pandemic – comes from central revenues negotiated by the Board of Control for Cricket in India, or BCCI, the sport’s national governing body. . This pot consists of the league’s central media rights deal with Star India, which paid $440 million in 2021, and its central sponsorships, which were worth $58 million in 2021.

According to Taurani of Elara Capital, 45% of central revenue was shared equally between the eight IPL teams in 2021; for comparison, the NFL and NBA share about 60% and 40% of their revenue, respectively. Additionally, 5% of the central revenue was distributed to the four IPL playoff teams – champion Chennai Super Kings, Kolkata Knight Riders, Delhi Capitals and Royal Challengers Bangelore – based on their performance. BCCI retains the remaining 50% of central revenue. Only about 20% of revenue comes from individual team sponsorships, game tickets and merchandise.

Additionally, the IPL has a salary cap that keeps player payroll (just under half of operating expenses) to a maximum of 35% of revenue; it is much less than in the NFL (48%) and the NBA (51%). It helps explain why each of the eight IPL teams that have played in 2021 have been profitable even though the matches had no fans in attendance, with Covid-19 depriving clubs of the $3-4 million they each typically collect in ticket revenue.

Revenue sharing results in a narrow range of team ratings, with pecking order largely determined by market demographics and success on the pitch. The most valuable team – the $1.3 billion Mumbai Indians – have won the most IPL titles (5) and play in India’s financial capital, in a state that ranks second in the country in terms of total population (135.7 million) and first with its number of Forbes-certified billionaires (58).

The rough diamond on the list is the Royal Challengers Bangalore, ranked sixth with $1.04 billion. The Royal Challengers play in India’s IT capital, and their state has the third highest number of billionaires (22) among IPL teams. But they never won an IPL title. “The team hasn’t reached its potential in terms of merchandise revenue and endorsement due to its performance on the field,” notes Francis of Brand Finance.

The idea here is that the values ​​of the IPL team will experience solid appreciation over the next few years as non-media revenue streams increase. Central sponsorship revenue, for example, is expected to exceed $100 million in 2022, and analysts believe NFT deals and a video game (both part of central revenue) will boost sponsorship revenue even further, as they did it with the American teams. There is also considerable potential for licensing and merchandising as the league, consumers and the state get better at grips with piracy.

THE MOST VALUABLE TEAMS OF IPL 2022

1. Bombay Indians

• Value: $1.3 billion

• Revenue: $33 million

• Operating result: $5.5 million

• Owner: Trust Industries

2. Chennai Super Kings

• Value: $1.15 billion

• Revenue: $41.2 million

• Operating result: $14.8 million

• Owner: India Cements

3. Kolkata Knight Riders

• Value: $1.1 billion

• Revenue: $41.2 million

• Operating result: $14.1 million

• Owner: Shah Rukh Khan

4. Lucknow Super Giants

• Value: $1.075 billion

• Revenue: N / A

• Operating result: N / A

• Owner: PR-Sanjiv Goenka Group

5. Capitals of Delhi

• Value: $1.035 billion

• Revenue: $35.4 million

• Operating result: $8.3 million

• Owner: GMR Group, JSW Group

6. Royal Challengers Bangalore

• Value: $1.025 billion

• Revenue: $36.4 million

• Operating result: $9.7 million

• Owner: United Breweries

7. Royals of Rajasthan

• Value: $1 billion

• Revenue: $31.7 million

• Operating result: $6.6 million

• Owner: Emerging Media Ltd.

8. SunRiser Hyderabad

• Value: $970 million

• Revenue: $31.8 million

• Operating result: $3.2 million

• Owner: Sun TV Network

9. Kings of Punjab

• Value: $925 million

• Revenue: $31.2 million

• Operating result: $9.8 million

• Owner: Mohit Burman, Ness Wadia, PZNZ Media

10. Gujarat Titans

• Value: $850 million

• Revenue: N / A

• Operating result: N / A

• Owner: CVC Capital Partners


Methodology

Revenues and operating profit (earnings before interest, taxes, depreciation and amortization) are estimates for the 2021 season and have been converted to US dollars based on the average exchange rate for this season (1 INR = 0, 0135 USD). Enterprise values ​​(equity plus net debt) are based on historical transaction prices, revenue outlook and market demographics and have been 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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