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Companies with direct or indirect interests in the Indian Premier League (IPL) have not had a great run in the markets. Sun TV Network has been the only gainer among this group with exposure to IPL cricket teams with its stock giving a positive return of 10 per cent in at least the last five years.
On the other hand, stock prices of companies such as India Cements, GMR Infrastructure, Reliance Industries, Deccan Chronicle and Kingfisher Airlines, have lost in the range of 16-99 per cent during this period.
Partly the reason for resilience shown by Sun TV’s stock price is because media stocks have performed extremely well as the sector has been immune to the global economic crisis.
Dislike for unrelated biz In contrast, the other players operate in cyclical sectors, such as cement, aviation, power and oil and gas and got affected by the events following the global financial crisis of 2008. The stock price fall may also be a reflection of the market’s dislike for companies’ presence in unrelated businesses, such as owning a stake in a sports team.
The share price of Deccan Chronicle Holdings, despite being a media company, has lost the most as the IPL governing council terminated its franchise Deccan Chargers for breaching contract terms. Sun TV acquired the rights of the Hyderabad IPL franchise in October 2012 when the IPL governing council conducted fresh auctions for the team.
Mumbai Indians is owned by the Mukesh Ambani Group but is not a listed entity.
Analysts’ dilemma However, analysts are worried about the prospects of Sun TV on account of disappointing financial performance in the September 2015 quarter, which was partly due to continued increase in losses from its IPL franchise. The company expressed its intention of hiving off the stake in the team.
The latest to enter the IPL, CESC’s franchise New Rising Promoters Pvt Ltd, has acquired rights for the Pune team for the upcoming season of IPL. Analysts are concerned about its impact on the company’s strong cash flows. However, the company’s chairman has clarified to a television channel that the franchise will not be a subsidiary of CESC and will be part of the family or some other group company.
The CESC stock has outperformed its private sector peers, such as Tata Power and Reliance Power, though it is down 19 per cent.
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