The Sun TV Network has won the Hyderabad franchise of the Indian Premier League for a little over Rs 85 crore a year.
This puts an end to BCCI’s hunt for a new team following the controversial termination of the cash-strapped Deccan Chargers.
According to sources, Sun TV and PVP Ventures were the only two companies which bid for the new IPL team. Four other companies, though had collected the forms, did not bid.
While some analysts say this may dilute the company’s profit margins, Sun TV Network’s group CFO says that the company has done its arithmetic carefully.
“We are confident of creating a very valuable asset for our shareholders through this,” Sun TV Network’s Group CFO, SL Narayanan, told Business Line in an exclusive interview. Excerpts:
Do you see any synergy between your existing business and the IPL franchise?
Sun TV has a fairly strong presence in Andhra Pradesh by virtue of Gemini TV along with all our associated channels under the Gemini brand, offering music, news, comedy, movies and animation.
The Sun Group also has a large FM radio broadcasting footprint through its popular brand Red FM in cities such as Hyderabad, Vizag, Vijayawada, Rajamundhry, Warangal and Tirupati.
The IPL franchise is a great property that fits in very well with our primary focus on media and entertainment, with significant synergies and rub offs on to other complementary brands.
Considering that you may have to spend at least a similar amount to build the team, would this not be a big drain on your finances?
No, not at all. We have done our math carefully. If anything, the IPL operations will be hugely free cash flow positive over the five-year period starting with the season of 2013.
We will, of course, be requiring some marginal working capital funding between year one and two, which is the seasons of 2013 and 2014. These are pretty modest sums and will not move the needle in any noticeable manner.
Post year three, I am sure the receipts will far outnumber the spends. We are confident that we will create a very valuable asset for the shareholders. The IPL franchise will also have an enduring life as the rights being acquired are for perpetuity.
IPL as a business seems to have a long gestation period.......
It is not a long gestation project at all. We believe that the cash flows from sponsorship and gate receipts will largely meet the costs of operation in year one itself and we will attain breakeven by year two.
But, not many teams are making profits. How are you planning to turn the tide?
Again, not true. There are several teams that make a handsome profit from IPL operations.
Some that do not make a viable profit are those that had bid at levels that unfortunately do not make a positive NPV.
Will you opt for fresh bidding to form the team?
The BCCI has permitted us to retain - at our option - all the players belonging to the erstwhile Deccan Chargers team; there are some fantastic names in that list and we will decide the team by October 31.
Are you planning to float a separate holding company for this venture?
What is a probable name for the team?
We have not decided that as yet; the name will, of course, be subject to approvals by BCCI.
Sun TV shares lost 3.5 per cent on the stock exchange today….
I would not even try to hazard a guess. We are focused on building long-term shareholder value and we rather not get distracted by day-to-day swings, which could also be due to technical factors.