IPL controversies cloud surging brand value

The first truly global brand to emerge out of India is under a cloud. With fresh controversy breaking out each day around the Indian Premier League (IPL), experts are raising concerns over the valuation of the brand listed by Forbes magazine as the fourth hottest sporting property in the world.

A Brand Finance research report released in February this year had estimated IPL’s branded business value in 2010 at $4.13 billion (Rs 18,998 crore), up from $2.01 billion (Rs 9,245 crore) a year earlier. However, says Brand Finance Managing Director M Unni Krishnan, “If purposeful action is not taken in the next 6-10 months, significant value erosion will happen.”

Franchises which are under the lens of the Income-Tax Department, such as Rajasthan Royals, Kings XI Punjab and Kolkata Knight Riders, may have to come off their lofty valuations. The Brand Finance report estimated the brand value of KKR at Rs 208.90 crore, next only to Chennai Super Kings’ Rs 224.10 crore. Kings XI was seventh at Rs 166.80 crore. “CSK would gain in valuation from winning the tournament. The valuation difference of CSK with teams such as KKR, Rajasthan Royals and Kings XI, which have performed poorly and have been caught in I-T probes and ownership controversy, will increase substantially in the coming months.”

Agrees Suhel Seth, the founder of Equus: “Devaluation of the property in the coming months is a distinct possibility. Sponsors and advertisers will now stand to hesitate before aligning with the event in the coming season.”

IPL secured sponsorship deals this year from a host of new companies — Swiss watch brand Banderlier, Karbonn Mobiles, Indiagames, Maxx Mobile — which are worth a combined Rs 125 crore a year. Tyre Company MRF, too, joined the IPL bandwagon by sponsoring the blimp, a balloon that floats over the stadium, in a deal said to be worth Rs 15 crore a year.

“What the controversy means is that the bargaining power of IPL as an institution will be curtailed in the next season,” says Seth.

Santosh Desai, CEO of Future Brands, is certain that the valuation of the franchises will suffer. “Valuations are sensitive and dependent largely on public sentiment. A host of questions have been raised related to IPL as a business. People will now be much more restrained in their approach to IPL as a whole.”

Piyush Pandey, chairman of Ogilvy and Mather (South Asia), strikes a contrarian note. “The degree of setback the event receives would be determined by the outcome of the probe. The new management has the challenging task to carry forward the brand with the same zeal Modi and team has depicted.”