Sun TV takes the field in IPL

Buys Hyderabad franchise for Rs 85 cr per year

The Kalanithi Maran-owned Sun TV Network has bought the Hyderabad franchise of the Indian Premier League (IPL) with a winning bid of Rs 85.05 crore per year.

The IPL governing council met earlier today to open bids for a new franchise. Sun TV’s bid, according to Board of Control for Cricket in India (BCCI) secretary Sanjay Jagdale, represents a premium of over a 100 per cent above the amount paid by previous owner Deccan Chronicle Holdings Ltd (DCHL) for the Hyderabad franchise in 2008.

As soon as the news of Sun TV’s successful bid was out, investors in the company started selling shares. The Sun TV scrip closed at Rs 343.65, down 3.5 per cent, on the BSE. The fact that a majority of the existing franchise holders are not doing very well may have shaken the confidence of investors in the otherwise solid entertainment company. Sun TV had posted a consolidated net profit of Rs 692.9 crore for the year ended March 2012.

DCHL’s contract was terminated by the BCCI last month. DCHL would have paid Rs 214 crore to the BCCI as franchise fee for the next five years, but Sun TV Network will end up paying Rs 425.25 crore for five years. It is learnt that Sun TV has deposited Rs 20 crore and will have to pay a bank guarantee every year equivalent to the franchise fee. Over and above that, it will pay Rs 85.05 crore a year as the franchise fee.

After five years, Sun TV will pay 20 per cent of the franchisee income received, in four quarterly instalments to the BCCI.

V C Unnikrishnan, chief financial officer of Sun TV, said the acquisition of the IPL team would be funded through internal accruals. “We are into the business of media and entertainment. Cricket is possibly the largest entertainment that happens in the country in terms of sports. The BCCI issued a tender for 12 cities. Two of them were in the south — Kochi and Hyderabad. We made a bid for the Hyderabad team,” he said.

The only other bid received was of Rs 69.03 crore per year from PVP Ventures. PVP Ventures had, earlier, bid Rs 900 crore to acquire the team from DCHL. However, the beleaguered company had rejected the bid.

Earlier, the BCCI had announced all the dues of the players had been cleared. Now, the erstwhile Deccan Chargers players will get the first option in the new team owned by Sun TV. Sun TV will have time till Friday to inform the IPL about which players they want to retain.

The remaining players will then be auctioned from the common auction pool.