Come April 3, and cricket-crazy fans across the world be glued to Indian Premier League (IPL) matches played

every day, for another 60 days. At stake in this world showcase for Twenty20 cricket, a shorter format of only 20 overs, is prize money of Rs 25 crore ($5 million) and the billing as the worlds richest cricket tournament. But the prize money is only a small part of the larger advertising and broadcast rights riches lavished on this series. Some quick history before we come to that. The first series was organised in 2008 by the Board of Control For Cricket in India (BCCI), the national governing body for the game across the country. IPL 6 this year will be contested by nine teams comprising players from around the cricketing world. The latest addition to the million dollar club is Australian cricketer Glenn Maxwell who was bought by Nita Ambani-owned Mumbai Indians for $1 million (Rs 5.5 crore). IPL will henceforth be called Pepsi IPL after the soft drink major won the title sponsorship with a winning bid of Rs 396.8 crore for 10 years. IPLs brand value was estimated to be around $3 billion (Rs 16,500 crore) in the 5th season. The 5th season was clinched by Kolkata Knight Riders, the franchise owned by Bollywood actor Shah Rukh Khan. Brand Finance, a brand valuation firm, has placed Mumbai Indians at the top of the valuation league at $48 million followed by Chennai Super Kings ($ 45 million) and Royal Challengers Bangalore ($41 million). The Teams, Owners & The Money Paid During the initial bidding, Mukesh Ambani-led Reliance Industries bid the most ($111.9 million) for the Mumbai franchise Mumbai Indians. And then Subrata Roy-led Sahara Group awed everybody with their bid of $370 million for Pune Warriors.

Team Economics Every team plays each other in IPL both at home and away in a round-robin system. The top four ranking sides progress to the knockout stage of semi-finals followed by a final. To say whether an IPL team is making money or bleeding its owners is difficult since costs vary sharply and incomes are different for different teams. Revenue: Share of television rights and central sponsorships, team sponsorship, share of gate receipts and instadia advertising Expenditure: Franchisee Fee to IPL, Player fees, stadium hire charges and marketing costs. For example, Sahara paid around Rs 1,700 crore for the Pune Warriors rights but Sun paid only Rs 850 crore for the born-again Sunrisers Hyderabad. Similarly, franchisees like Chennai Super Kings, Mumbai Indians and KKR have attracted sponsors and advertisers unlike other teams but these teams are paying the top price for some key players. A new idea has been floated by CSK this year health cafes. They are also expecting merchandise sales to bring in Rs 10 crore. IPLs financials Broadcast rights sold by IPL for over Rs 8,700 crore ($1.6 billion) for 10 years. While 20% of it would go to IPL, over 70% would be distributed among franchisees. The title sponsorship has been sold to Pepsi for Rs 398 crore for 10 years. In-stadia advertising and ticket sales. For e.g. KKR has started selling tickets for the current season between Rs 300 and Rs 9,000. In return, IPL offers a total Rs 25 crore in prize money. While the champion team wins Rs 10 crore, runner-up gets Rs 7.5 crore, the third place team wins Rs 3.75 crore and the 4th place team also wins Rs 3.75 crore So, how has BCCI gained from IPL? Heres a look at the latest available numbers. Figure 1 (a)

Figure 1 (b)

So the surplus from IPL has more than doubled to over Rs 265 crore for the year ended March 31, 2012 from Rs 119 crore in the previous years. Clearly, IPL can be a money-making machine for BCCI, which is touted as the richest cricketing body in the world. BCCIs other sources of income include cricket tours, grant of media rights, income from International Cricket Council (ICC) and interest income. (see chart) BCCI spends money on organising camps for young cricketers and programmes for coaches, umpires and ground curators. An idea that BCCI is working on is specialist academies to enhance cricketing as well as other skills like umpiring.

Well, thats the IPL story till now. Wait for an exciting climax on May 26And a new round of stories next year about player switching, million dollar deals and much more

NEW DELHI: Indiawin Sports Pvt Ltd, the owner of Mumbai Indians IPL team that is currently leading the tally in the ongoing 20-20 cricket tournament, has posted a net loss of Rs 15.42 crore for the fiscal year 2010-11. Sachin Tendulkar-led Mumbai Indians (MI) team is owned by IndiaWin Sports Pvt Ltd, a subsidiary company of RIL. The financial details of the IPL franchise has been disclosed by industrialist Mukesh Ambaniled Reliance Industries Ltd (RIL) in its annual report for the financial year ended March 31, 2011. RIL further said that Indiawin's total assets stood at Rs 65.28 crore at the end of year ended March 31, 2011, while its turnover or total income for the fiscal was Rs 112.80 crore. In the ongoing fourth season of IPL tournament, MI is currently ranked on the top and has won most of its matches so far. Speaking about the team, RIL said in its annual report that "MI registered the most number of wins in Season 3 of the Indian Premier League, and reached the finals. MI has been the most followed team in the IPL and enjoys a huge global fan base". RIL has listed Indiawin as one of its subsidiary companies with a 98.3 per cent stake. The remaining stake is also held by associate companies of the RIL group. Till the previous financial year 2009-10, RIL had listed Indiawin as an associate/joint venture company, and not as a subsidiary, with a 50 per cent direct stake. RIL further said that it did not give any loans during the year 2010-11 to Indiawin Sports Private Limited, as against a loan of Rs 44.60 crore in the previous year. Prior to this, RIL had given a loan of Rs 57.73 crore to Indiawin during the year ended March 31, 2009. Mumbai Indians was the most expensive franchise in the first three seasons of the IPL. During the IPL Player Auction 2011, MI retained Sachin Tendulkar, Harbhajan Singh, Kieron Pollard and Lasith Malinga with the team's other notable signings at the auction being Rohit Sharma ($2.1 million), Andrew Symonds ($850,000) and Munaf Patel ($700,000).

How Profitable is an IPL Franchise 17052008

While coming out of the IPL franchise auction held on January 24, 2008, the winner of the Chennai franchise, the MD of India Cements N.Srinivasan spoke to the Hindu. This will be a good investment. We expect to build this into a viable and vibrant franchise, he said. After agreeing to pay US $ 91 million (Rs 3.60 billion) for a ten year contract, it was hard to figure out how he would make profit. M.S.Dhoni alone is costing him for $ 1.5 million per year, in fact just for 45 days of service. Now, that IPL is well under way and it has become hugely popular, it will be interesting to see the business model of an IPL franchise. Using Chennai Super Kings (CSK) as an example, we look at their revenue streams and expenditure heads. The single biggest revenue stream for a franchisee in the initial years is the share of the television revenue. Not for nothing, is IPL being bandied as Made for TV. CSK will receive $ 10 million in the first year and this will go down to $ 6 million every year from the sixth year onwards, when the number of teams increase and the share of the IPL (read BCCI) increases from 20% initially to 40 % from the sixth year onwards. Mr. Srinivasan in an interview to the Economic Times has said If we had bid $90 million over a ten-year period, well get back $80-90 million as TV income itself. The title sponsorship is another major revenue stream. AirCel and Coromandel Super King are the title sponsors of CSK. Although no information is available, it may be around $ 5 million every year and this should go up significantly if the team performs well in the IPL. Add to that a slew of local co-sponsors and this revenue stream gets shored up even further. CSK also gets a share of the $50 million each year paid by DLF as the IPL sponsor. This is estimated to be $ 3.75 million every year during the first five years. After the first five years, the title sponsorship contract comes up for renewal. If IPL turns out to be a big success, expect this to double. Gate collection from the home matches in Chennai is another source of income. CSK will be hosting seven matches this season. The M A Chidambaram stadium has a capacity of 50,000 spectators. CSK has priced the tickets ranging from Rs 200 to Rs 5000 for the AC pavilion. Assuming an average occupancy of 80% and price of Rs 400, the gate collections for CSK, after paying IPL its 20% share, is likely to be around $ 2 million. CSK will also be earning from instadium advertising. This may generate another $ 2 million in the first year. CSK sells its merchandise like T-shirts and caps through its web-site and other channels. This revenue stream can be a big money spinner if the franchisee is able to build a huge fan following and city loyalty. From a small income of $1 million in the first year, it is estimated that this can go up to $ 15 million in the tenth year. The prize money for the winner of IPL is also not an amount to sneeze at. The winner of IPL will get US $ 2 Million. The teams placed lower also get significant cash awards. Lets assume that CSK will receive $ 1 million per year as prize money. There is also a possibility of CSK making good amount of money by judiciously trading players contracts in the Year Two and Three. For example, Mumbai Indians or Rajasthan Royals may be interested in buying the contract of Parthiv Patel as they are playing local wicket keepers whereas Mr. Dhoni will always be the first choice as wicket keeper for CSK.

Now we look at the expenditure side.

Apart from the USD 91 Million paid upfront as the franchisee fee for ten years, the major item of expenditure is definitely the players contracts. In addition to Mr. Dhoni, CSK bought foreign players such as Mathew Hayden, Mike Hussey,Makhaya Ntini, Jacob Oram, Stephen Fleming, Muralidharan, Albie Morkel, Kapugedera and Indian T20 stars like Suresh Raina, Joginder Sharma. These star players cost a total of $5.575 million per year. The rest of the 24 member team is made up of local Tamil Nadu players and under 19 players, these have all been signed up for US $ 30,000 each. CSK also has a team of four supporting the team with Kepler Wessels as the coach. The annual expenditure on account of players is estimated to be $ 10.6 million. These contract fees are fixed for the first three years, after which there will be fresh round of auctions. If IPL is the biggest festival this summer, certainly the hype created by the IPL organizers, media and the franchisees is responsible for it. This does not come free. The IPL franchisees would have a significant marketing and advertising spend. CSK has the Tamil actor Vijay as their ambassador and former captain K.Srikkanth as the brand ambassador. CSK has created a video featuring all the players with music by A. R. Rahman. Sivamani, the ace drummer, is seen wearing the CSK yellows wherever CSK plays. CSK maintains a web-site for creating a community of fans and selling tickets and merchandise. Like all the IPL teams, CSK has its band of foreign cheergirls. The marketing and promotion spend could be of the order of $ 4 million per year.

The other expenditure would be related to paying the rentals to the local cricket association for the stadium. Running an office and organization which will work round the year, not just the 45 days of IPL season is also expensive. Add to that travel and hotel expenses. Perhaps airline and hospitality sponsors lessen the burden.

So will CSK make money?

If the initial franchising contract is treated as an investment, as per the estimates above, CSK is making an operating profit of over $ 8 million $ in the first year itself. If the $ 91 million is amortized equally in the ten years, then CSK would report a negligible loss of $ 0.7 million in the first year. Even, this could turn into a profit if CSK wins the IPL championship! If not in the first year, CSK is most likely to break even in the second year. From the third year onwards, when the sponsorship, merchandising and gate collection revenues go up, CSK may start generating net profits of $ 2.5 million (Rs. 100 million) on a revenue of $ 30 million (Rs 1200 million) from the third year. If the IPL gains in even more popularity the revenues and profits will go up further. Lalit Modi, the IPL Commissioner said Each IPL franchise could be worth $ 5 billion. It is expected that many IPL franchisees will go public after the third year. Ill not be surprised if CSK has a market capitalization of $ 500 million (Rs 20 billion), five years from now. When Mr. Srinivasan, who incidentally is also the treasurer of BCCI, said IPL franchise is a good investment, he certainly knew what he was talking about - G. Mohan

BANGALORE|NEW DELHI: The owners of Deccan Chargersand Royal Challengers Bangalore have joined some other Indian Premier League (IPL) franchisees in considering a partial sale of their stakes as revenues rise and interest in the tournament remains high despite a string of controversies. The owner of Deccan Chargers, Deccan Chronicle, has mandated Religare Capital Markets to manage the transaction, a person close to the development said, adding the sale is likely to fetch about $214 million, or 1,200 crore. On Friday, Deccan Chronicle Holdings told the BSE "the company has been approached by multiple parties evincing interest in acquiring stake in the company's IPL team and the company has appointed Religare Capital Markets to run a process and advise us of suitability of the offer(s). The above step is only exploratory and no conclusive/firm decision has been taken". Vijay Mallya, the promoter of Royal Challengers Bangalore, is also interested in a partial stake sale in the franchise, though group spokesperson Prakash Mirpuri rubbished the idea in an SMS response to ET. "There is absolutely no question of a stake sale in the ... team. We have announced our desire to consolidate all our sporting interests under one single entity. Options for this are still under evaluation," Mirpuri said. The chief operating officer of Deccan Chargers, E Venkatram Reddy, refused to comment. Religare Capital Markets, however, said in an email response, "We don't comment on matters relating to clients and market speculation."

The two southern team owners join the Rajasthan and Punjab owners in trying to sell a slice of their stake as the tournament completes five successful years. Though all teams have not become champions, some have done very well, managing to increase gate receipts, viewership and merchandise. Royal Challengers Bangalore was a finalist in the second edition in 2009 while Deccan Chargers and Rajasthan Royals won the 2009 and 2008 editions, respectively. But industry executives and Royal Challengers Bangalore watchers say Mallya is keen on a stake sale and has already rejected an offer for a 51% sale, preferring to shed only 26%. Deals for Rajasthan and Punjab teams are expected to be finalised once their owners settle an arbitration case with the Board of Control forCricket in India (BCCI). The owners of the two teams did not respond to emails sent by ET. The cricket board recently offered them an option to clear their cases by modifying the ownership structure - with Suresh Chellaram selling his 44.1% stake in the Rajasthan team and Gaurav Burman selling his stake in the Punjab team to other owners. Talks with a number of potential buyers, however, remain stalled because the two teams have not been able to get a clearance from the BCCI.

ET had reported sometime ago that a Kolkata businessman, Mannoj Kumar Jain, was close to buying a majority stake in Rajasthan Royals for about 1,100 crore, barring the 11.7% stake held by Raj Kundra and his wife, Bollywood actress Shilpa Shetty. All other owners, including Nigeria-based NRI businessman Suresh Chellaram, Manoj Badale-promoted Emerging Media and Lachlan Murdoch, are selling their stakes. This sale will be subject to clearance from the BCCI. In 2010, just before the board decided to terminate the Punjab franchise, the team was in talks with a British private equity player to sell 93% stake for about $250 million (1,380 crore at current exchange rates). The board refused to grant approval until investigations related to former IPL commissioner Lalit Modi's involvement in the Punjab team were completed. Deccan Chronicle had bought Deccan Chargers for $107 million (about 590 crore at current rates) in 2008 and has paid close to $53.5 million ( 295 crore) to BCCI to date as franchise fee for five years. Besides, it has paid close to $40 million ( 220 crore) as player fees in the five seasons for IPL. "Every franchisee is willing to sell some stake if it gets the right price and the right partner," said a senior executive at one of the IPL teams, who did not wish to be named. IPL-V has seen most teams break even. Teams are starting to innovate on new revenue streams to bring in additional revenues. Over the years, IPL has been used by the likes of Chennai, Bangalore and even Hyderabad to build a corporate identity. A valuation of $200 million for the Rajasthan team, $214 million for Hyderabad and under $250 million for Punjab, though, is still much lower than the $370 million Sahara paid for the Pune franchise in 2010. When the Pune team joined the championship, some expected the price to become the benchmark for valuation of IPL teams. "In today's market, where liquidity is a huge concern, even the current valuations are very healthy compared to what the owners paid for their teams back in 2008. They will be making a very profitable exit," said a senior executive at another IPL team.

IPL 1st season closure:Profit and Loss!

Only two teams have registered profit, they are Kolkata Knight Riders and Rajasthan Royals.

Kolkata Knight Riders FRANCHISE FEE: Rs 300 Cr REVENUES: 89 BCCI, SET MAX: 35 TEAM SPONSORS: 34 GATE RECEIPTS: 20 EXPENSES: 81 FRANCHISE FEE: 31 TEAM: 25 AD, ADMIN: 25 NET PROFIT: Rs 8 Cr Rajasthan Royals FRANCHISE FEE: Rs 268 Cr REVENUES: 55 BCCI, SET MAX: 35 TEAM SPONSORS: 15 GATE RECEIPTS: 5 EXPENSES: 50 FRANCHISE FEE: 27 TEAM: 13 AD, ADMIN: 10 NET PROFIT: Rs 5 Cr

Kings Punjab FRANCHISE FEE: Rs 304 Cr REVENUES: 61 BCCI, SET MAX: 35 TEAM SPONSORS: 18 GATE RECEIPTS: 8 EXPENSES: 64.4 FRANCHISE FEE: 30.4 TEAM: 25 AD, ADMIN: 9 NET LOSS: Rs 3.4 Cr

Chennai Super Kings FRANCHISE FEE: Rs 364 Cr REVENUES: 74 BCCI, SET MAX: 35 TEAM SPONSORS: 25 GATE RECEIPTS: 14 EXPENSES: 80 FRANCHISE FEE: 36 TEAM: 25 AD, ADMIN: 18 NET LOSS: Rs 4 Cr

Delhi Daredevils FRANCHISE FEE: Rs 336 Cr REVENUES: 71 BCCI, SET MAX: 35 TEAM SPONSORS: 20 GATE RECEIPTS: 16 EXPENSES: 79 FRANCHISE FEE: 34 TEAM: 23 AD, ADMIN: 22 NET LOSS: Rs 8 Cr

Deccan Chronicle FRANCHISE FEE: Rs 428 Cr REVENUES : 64 BCCI, SET MAX: 35 TEAM SPONSORS: 19 GATE RECEIPTS: 10 EXPENSES: 84 FRANCHISE FEE: 45 TEAM: 24 AD, ADMIN: 15 NET LOSS: Rs 20 Cr Mumbai Indians FRANCHISE FEE: Rs 448 Cr REVENUES: 70

BCCI, SET MAX: 35 TEAM SPONSORS: 18 GATE RECEIPTS: 17 EXPENSES: 91 FRANCHISE FEE: 45 TEAM: 20 AD, ADMIN: 26 NET LOSS: Rs 21 Cr Royal Challengers FRANCHISE FEE: Rs 446 Cr REVENUES: 50 BCCI, SET MAX: 35 TEAM SPONSORS: 0* GATE RECEIPTS: 15 EXPENSES: 95 FRANCHISE FEE: 48 TEAM: 22 AD, ADMIN: 25 NET LOSS: Rs 45 Cr

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