With 2 new teams, valuation of IPL franchise to get a boost

Ayushi Kar Mumbai | Updated on October 26, 2021

‘Teams will also have to take steps to win the war of improving their valuation’

The induction of two additional teams into the IPL franchise – Lucknow Scorchers and Ahmedabad Renegades – will be a major boost to the valuation of the franchise as well as individual teams, according to experts.

With teams increasing from 8 to 10, analysts expect the valuation of the treasured cricketing franchise to go up between 15 per cent and 25 per cent. Santosh N, Managing Partner at D and P Advisory, told BusinessLine: “From 56 matches we will be moving to around 70 matches, that is a 25 per cent increase in the number of matches, so a 25 per cent uptick is no brainer.

“2022 is also a year where IPL broadcasting rights get renewed; with new broadcasters bidding and the potential merger between Sony and Zee creating a broadcasting giant, the value of IPL might be 50 per cent higher.”

Viewership fatigue

According to Ajimon Francis, Managing Director at Brand Finance India, one major downside for an increase in matches could be that it could create viewership fatigue, which might, in fact, mean that the bump-up in valuation of IPL could be around 15 per cent

Francis said that the trickle-down effect on the valuation of teams could be lower. “The main source of revenue for the teams in the central pool of revenue that the IPL franchise gets, the BCCI divides between the teams. Here, we expect an uptick in valuation per team to be in single digits. Around 5 per cent to 6 per cent.” Therefore, ₹5,000 crore to ₹7,000 crore bid could be an overvaluation, but Francis believes that is not the case.

“Previous IPL auctions held a similar view of overvaluation, but that turned out to not be the case. Moreover, there is a spillover effect for the corporate beyond the direct IPL revenue which will be seen,” said Francis.

The overall perception of the corporate groups will improve; launches, engagements with team members and fans will also present opportunities for monetisation, according to Francis.

Also, Francis believes that with major opportunities such as merchandising still unexplored, IPL team valuations are yet to reach their peak.

With more teams and increasing competition, teams will also have to take steps to win the war of improving their valuation. According to Anuj Kapoor, Professor of Marketing at IIM-Ahmedabad: “That’s the course correction route. If too many players enter the market, the road to profitability and monetisation becomes long and only a few teams survive. It’s not about the numbers only, but an interplay of numbers and the team’s appetite to wait to be profitable that decides the life of an IPL team.”

Kapoor also anticipates some systemic back-end changes in terms of the improvement in training, investment in player development, player retention policies, monetisation policies as well. All these will be deciding factors towards the valuation of teams.

Published on October 26, 2021

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