IPL media rights auction: Teams and their valuations benefit

The Indian Premier League is unaffected by the danger of a recession, rising interest rates, or tightening global liquidity (IPL).

In its mid-teens, the league raked in a record price for the rights to broadcast matches for the next five years, putting it firmly among the top sports leagues in terms of cost per match, such as the NFL in the United States and the English Premier League in the United Kingdom.

The Board of Control for Cricket in India (BCCI) will get Rs 48,390 crore from the record-breaking bidding for media rights that ended on June 14.

The television rights to the IPL, the world's richest cricket competition, were retained by Disney Star for Rs 23,575 crore, while the internet rights were acquired by Viacom18 for Rs 20,500 crore.

Viacom18, a Reliance Industries-owned broadcasting joint venture, has obtained non-exclusive international rights for Rs 3,257.5 crore, while Times Internet selected foreign broadcast rights for specific territories.

The teams who attract the best global talent and have a global audience would be the largest benefactors of the three-day auction, which set a new record.

According to the BCCI's prior declaration on revenue sharing from television rights, franchises are entitled to 40% of the earnings, with the remaining 40% going to the board.

In a 2017 interview with the Indian Express, then-treasurer Anirudh Chaudhry stated that the BCCI splits the broadcast revenue 50-50. "However, they must pay BCCI 20% of their revenue." Because 20 percent of 50 is 10%, it becomes 60 to us and 40 to them. "This is ignoring all taxes," Chaudhry said to the publication.

The wealthy become even wealthier

Based on the figures above, each IPL club is expected to earn Rs 387.1 crore per year purely from media rights, up from Rs 163 crore per year. In addition, the teams that place in the top four in each edition will receive a 10% share of the media rights revenues.

The windfall will let IPL teams significantly improve their topline. For example, the Mumbai Indians, which are owned by Reliance Industries and are the league's most valuable club, reported sales of Rs 317 crore in 2020-21.

Media rights are the bread and butter for IPL clubs, accounting for 69-75 percent of earnings. Sponsorship partnerships and a variety of tournament-related profits are among the other sources of money.

In 2020-21, media rights amounted for 75% of revenue for the Chennai Super Kings, while sponsorships accounted for 24%.

Analysts believe that a large increase in the IPL clubs' revenues will reflect in their valuations.

Elara Securities, a brokerage firm, predicts that an IPL team's minimum valuation will rise to $1.2 billion, based on a 14-15.5 times projected market capitalization-to-sales ratio. According to Elara Securities, the Mumbai Indians are currently worth $1.3 billion.

According to Elara Securities, the lowest-priced IPL team, Gujarat Titans, which is valued at $747 million, might experience a 60 percent increase in value. Gujarat Titans made their debut this season and won the competition. Other clubs' earnings are expected to grow in the future, therefore an upward revision is likely.

Elara Securities, on the other hand, believes that based on the players' profile in the team, better sponsorship revenue, and qualification for the play-offs, the base valuations of an IPL franchise could vary by 15% higher or lower.

According to analysts, Sun TV Network, Reliance Industries, and United Spirits will see a boost in their market capitalization as a result of the predicted increase in market value in the IPL clubs they own. Sunrisers Hyderabad and United Spirits Royal Challengers Bangalore are owned by Sun TV.