US-based private investment firm RedBird Capital Partners, which has a stake in Liverpool and Boston Red Sox, has picked up a 15 per cent stake in Rajasthan Royals for an undisclosed amount.
This is the first formal investment by a firm with a global portfolio of sports investments into the homegrown cricketing league.
Experts lauded this move as validation for IPL’s brand proposition and believe that it is likely to bring global sports management expertise into the cricket franchise.
Santosh N, Managing Partner at Duff and Phelps advisory and the author of the IPL Brand Valuation Report 2019, said, “Investment by a PE firm like Redbird, which is regarded for picking up high performing sporting assets in the US and Europe, into an IPL team, only highlights the potential IPL has in specific and sports cricket leagues and sports in general has from a business perspective.”
Brand valuation
While Santosh did see some negative impact in valuations for IPL during last year, he believes it to be a temporary effect of the pandemic and said this investment showed the true potential that IPL has.
Ajimon Francis, Managing Director at brand valuation consultancy, Brand Finance, said, “One of the key levers for brand valuation is how well a sporting team is able to generate more streams of revenue such as merchandising. IPL teams have not particularly broken ground here.” Francis believes that the global sports management expertise brought forth by seasoned sports investors such as RedBird could help Rajasthan Royals with this revenue stream.
Global investment
According to the press release, RedBird will provide strategic investment and expert counsel to Rajasthan Royals for long-term growth, on-pitch success, and commercial objectives.
Whether this investment means global interest and investment into Indian sports is yet to be seen. Cricket, however, is likely to be the first beneficiary for foreign investment, “By 'sports', I would suggest that 95 per cent of the investments in the coming two to three years are expected to be in cricket (and majorly in IPL). Over time, in the medium and longer run, we might see some investments in other sports like football and hockey,” said Anuj Kapoor, Professor for Marketing at IIM Ahmedabad. Overall, however, Francis believes that this investment will create a buzz amongst sports investors in Europe, US and West Asia.
Among IPL teams as well, Rajasthan Royals has historically been more active in seeking new investments unlike other franchisees, with most of the stake sales being secondary transactions, according to Santosh.
Francis believes that the next teams that could potentially vie for such investments are likely to be teams that have more democratic equity ownership such as Delhi Capitals, Kings XIPunjab, Royal Challengers Bangalore, where multi-party ownership make the transfer of equity easier.
However, Santosh said, “Some of the teams are under complete ownership of large business houses and whenever these business owners decide to unlock value, we might see more such transactions.”
RedBird also recently picked up a minority stake in Fenway Sports Group, which owns English soccer team Liverpool and baseball's Red Sox, the XFL, and they are also the majority owner of French football team Toulouse FC.