With the slump in real estate market and television ratings, DLF, the country’s largest real estate developer, is unlikely to continue with the title sponsorship of the Indian Premier League, according to sources close to the development.
According to officials from the Board of Control for Cricket in India (BCCI) and industry executives, the contracts expires at the end of the fifth season of the IPL in May. During the inaugural edition of the IPL in 2008, DLF had won the bid for Rs 40 crore per annum for five years, valuing the deal at Rs 200 crore.
“Although DLF will be getting the first right of refusal at higher sponsorship rate, it will be difficult for the company to manage an increase in the contract in the current scenario,” said a source familiar with development. When contacted, Rajeev Talwar, executive director, DLF said: “It depends on how do they perceive the value. After the current season ends, we will get six months to decide. When the offers come in January, we will take a call.”
Like many other realty companies, DLF is facing challenges on the debt and sales front. The company is looking to sell various assets which include Mumbai mill land and Aman Hotels, to raise as much as Rs 7,500 crore by March 2013 to reduce its staggering debt of Rs 22,750 crore.
In the December quarter, the company saw a 45 per cent drop in its net profit due to rising interest rates, commodity prices and slower home sales. The company has already painted a gloomy picture ahead.
“With the macro environment continuing to remain unfavourable with high interest rates, commodity and labour cost inflation... it may take a few more quarters for the company to regain full momentum,” DLF said in a statement after Q3 results.
“It is a expensive contract with plenty of mileage, but no other right or income. Any company which goes for it, will have to reduce the ad spend. Next year, if the contract increases, even if we assume it is Rs 100 crore, how many companies have such ad spend or willing reduce ad spend by that amount?"said a company source.
As soon as the fifth edition of the tournament ends, the Board of Control for Cricket in India's (BCCI) will be on an overdrive to invite new sponsors and partnership proposals for the Twenty20 league.
The agreements signed in 2008, had guaranteed revenue in excess of Rs 500 crore. BCCI had signed partnerships with Hero Honda (now Hero Moto Corporation) , Pepsico (official beverage partner), Kingfisher (as umpires partner), Vodafone (as telecom partner), Karbonn Mobiles, Citi (banking partner), and Volkswagen. All these deals are estimated in the range of Rs 30-35 crore.
BCCI had also roped in ITC as hotel partner and with Kingfisher as airline partner (50 per cent discount plus customised routing and charters). All this formed a substantial part of the central sponsorship pool, of which 60 per cent of the revenues were distributed to the franchises.
Touted as a money spinner, the world’s richest cricket league is finding the going tough in its fifth season. Advertisers are beginning to feel the Indian Premier League (IPL) may be too expensive a property.
Some big sponsors of the past such as LG and Godrej had preferred to stay away while Samsung, Micromax and Canon, among others, had cut ad spends. Maxx Mobiles, mobile handset provider, pulled out as the strategic time-out and official play-off sponsor, with a year’s contract still on.