IPL: Why Team Ownership Is About Valuations

The original teams from 2008 are sitting on unrealized capital appreciation of multibagger levels

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For the Torrent Group, the resumption of the Indian Premier League (IPL) on 17 May, after it was suspended due to armed hostilities between India and Pakistan, would be small relief. Gujarat Titans, the IPL team acquired by them barely two months ago, sits atop the points table. It's a strong contender to go all the way, the financial reward for which is 20 crore. Yet, in the larger scheme of sports ownership, that 20 crore financial upside is small change.

For owners of sports teams, like the Torrent Group, it's not so much about the team as a running enterprise, and the profits they generate. As a business, there is only so much that a sports franchise can grow.

What sports ownership brings is visibility. It also brings capital appreciation in its novel way. Much as sporting and operating performance matter, more than those two aspects, sports ownership is about owning an asset that is finite in quantity—there are only 10 IPL teams. In the case of IPL teams, this asset has continuously appreciated in value, one reason for which is its finite nature.

The Torrent Group, for example, has bought 67% from erstwhile owners CVC Capital Partners, a private equity firm, at a reported valuation of about 17,500 crore. Back in 2008, when the IPL was launched with eight franchises, the average purchase price of a franchise was $90.4 million, or about 350 crore at the exchange rate then. At a simplistic base level, that's a compounded annual return of 20%, more than double the BSE Sensex return of about 9% over the same period.

A similar appreciation in value would be one of the objectives for the four IPL team owners, and a bunch of high-profile tech CEOs of Indian origin, who have invested millions in a repackaged short-format cricketing league in England. The Hundred, which gets underway in August, is the latest commercial brainchild of the English cricket board to respond to the changing tone and tenor of cricket.