IPL franchisees expect valuations to go up by 3-5 times

The Indian Premier League (IPL) franchisees expect their valuations to go up by three to five times, if Lalit Modi, the commissioner of the lucrative 20-20 cricket tournament, adds two more teams at a base price of over $225 million. With the two new teams, whose bidding opens on Sunday, the number of IPL teams in 2011 will be 10.

“The auction of the two new IPL teams would form the basis of valuation of all franchisees. We bought Rajasthan Royals for $67 million and now our team valuation is some three times of that, according to some independent research data in the public domain. As the new teams become more valuable at least during the auction process, the experienced teams’ valuation would automatically go up,” Raghu Iyer, CEO of Rajasthan Royals, told Business Standard.

A similar view is echoed by other franchisees. A spokesperson for Kolkata Knight Riders said, “Our valuation has already gone up some three times compared to what we bought the team for. Now, if the property price itself is increasing 100 per cent, the team’s valuation would also increase accordingly.”

Sources in Chennai Super Kings on the condition of anonymity said, “If a new team becomes so incredibly valuable, the valuation of established teams would also go up and would surpass what the new teams would be bought for.”

When the two new franchisees received a poor response, IPL was forced to sweeten the terms of the bid, but kept the base price for the auction at $225 million, nearly double of the most expensive team bought in the first auction in 2008.

Experts, however, say that IPL has tremendous brand value. According to Unni Krishnan, managing director, Brand Finance India, which values IPL teams’ brand value, in comparison to international benchmarks for sporting business such as English Premier League (EPL), valued at $12 billion (around Rs 55,200 crore), the IPL juggernaut, in a short span of three years, is valued at $4 billion (around Rs 18,400 crore) and has the potential to grow further. “IPL property is in honeymoon phase right now and will enjoy all the first mover advantages.”

Ramesh J Thomas, president and chief knowledge officer of brand consultancy firm Equitor Management Consulting, said, “A team’s valuation depends on the property and the environment itself. The two new teams are reasonably unproven, so they would not gain on intrinsic valuation, although the comparative value may make the existing teams’ valuation look like it is going up.”

A Brand Finance research report states that the IPL’s branded business value has doubled to $4.13 billion (Rs 18,998 crore) in 2010 from $2.01 billion (around Rs 9,245 crore) a year ago. Chennai Super Kings is the most valuable IPL franchise at $48.4 million (around Rs 222.64 crore). Last year, Chennai Superkings was at No. 4 with a value of $39.4 million (around Rs 181.24 crore).