IPL may use 'discretion' to loosen bid clauses

Strong objections raised by potential bidders in consideration

The management of the Indian Premier League (IPL) Twenty20 tournament said it is willing to dilute some of the stiff clauses for bidding for the two new franchises whose teams will be in action in the T20 tournament from next year.

The decision has been taken in response to strong objections raised by companies that have picked up invitation to tender (ITT) documents ahead of the auctions scheduled for March 9. ICICI Venture, Sahara, Jaypee and the Adani group are among those that have picked up documents, according to sources.

Among the most contentious clauses is a requirement of a bank guarantee equivalent to 100 per cent of the money that the winning bidder offers for the 10-year contract within seven days of winning the bid. In the first round of bidding in 2008, franchisees of the eight IPL teams had to provide only 10 per cent of their bids as bank guarantee.

Bidders also need to have a net worth of $1 billion as a pre-requisite and offer a pre-bid bank guarantee of $100 million. In the 2008 auctions, prospective bidders paid a pre-bid deposit of Rs 20 crore.

An IPL source, however, said the bid document would provide the tournament’s management “discretion” to reduce the post-bid bank guarantee.

“There are many clauses and the 100 per cent bank guarantee is just one of them. It is not the most important and there is also a way out in there,” added IPL Commissioner Lalit Modi said. He added the main reason for the stiffer bid clauses this time is to ensure the winner bidder has the financial muscle to pay the money. “We do not want a bidder not being able to pay after winning,” Modi said.

Most prospective bidders said IPL’s willingness to dilute some of the bid clauses will partially help. Says a senior executive of a company which has exposure to sports: “The documents say you have to pay 100 per cent of the bid money as bank guarantee or an amount at the discretion of IPL. That is very arbitrary.”

In fact, he added, the ITT suggested everything is at IPL’s discretion and the bidders have no say.

The minimum bid price has been fixed at a staggering $225 million (Rs 1,042 crore), compared to the base price of $50 million (over Rs 230 crore) when the first auctions were held in 2008.

The cities that have been offered as the home location for the franchises are Pune, Ahmedabad, Nagpur, Kanpur, Dharamsala, Vizag, Rajkot, Cuttack, Baroda, Cochin, Indore and Gwalior.

On a question of IPL having to pay service tax on selling the broadcasting rights of the tournament as proposed in the Union Finance Bill 2010, Modi said, “We always had a clause in our contract with the broadcaster and it will apply to the person concerned, so any tax liability will have to be borne by the broadcaster.

He made it clear that IPL would not absorb any of the extra cost that would accrue due to a 10 per cent service tax that has been proposed on sports sponsorships.