Sun TV buys IPL’s Hyderabad franchise

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K Shriniwas Rao TNN

Mumbai: Hyderabad will continue to have its own Indian Premier League franchise. Chennai-based media group Sun TV Network, owned by the powerful and politically savvy Kalanithi Maran, bought the Hyderabad IPL franchise in an auction on Thursday for Rs 425 crore, payable in the next five years at Rs 85.5 crore (approx $16m) per year. Hyderabadbased PVP Ventures, promoted by Prasad V Potluri, was the only other bidder at Rs 69.03 crore.
Maran, a tough negotiator, who also owns SpiceJet, hopes to find synergies between his southern entertainment business and the cricketing spectacle. Sun Network will now replace the debt-ridden Deccan Chronicle Holdings Ltd (DCHL) in Hyderabad, parent company of the Deccan Chargers franchise, which was terminated by the BCCI for delaying players’ payments and mortgaging the franchise with private banks.
The DCHL had bought the Chargers in 2008, IPL’s firstever franchise auction, for a handsome price of $107 million (Rs 421 crore), payable at Rs 42.01 crore per year over a period of 10 years.
Until IPL-5, the DCHL had paid the BCCI $53.5m (Rs 210.05 crore) and an exact amount remained to be paid before the franchise slipped into financial hot water. Thursday’s deal means Sun will pay almost double of what the Chargers would have paid the BCCI in the next five years as instalments for buying the franchise. Hyderabad only city among 12 to attract a bid
It is double what RIL paid for Mumbai Indians (Rs 441 crore for 10 years), but almost half of what Sahara forked out (Rs 1,700 crore) for Pune in 2010.
Sun TV’s bid was one of the only two offers that came in for Hyderabad on Thursday, when the IPL governing council met in Mumbai to open the bids after floating a tender for 12 cities early this month. Sun paid the BCCI an immediate signing deposit of Rs 20 crore after winning the bid.
Noida-based Jaypee Group was in the race to bid for a franchise and had requested the cricket board to allow the team to be based out of Kanpur until a stadium could be constructed in Noida in due time, if they won. However, Jaypee’s bid did not come in.
The bids for the new franchise had been invited by the BCCI through a tender for 12 cities that included Ahmedabad, Cuttack, Dharamsala, Indore, Kanpur, Kochi, Nagpur, Noida, Rajkot, Ranchi and Visakhapatnam, apart from Hyderabad.
None of the cities, except for Hyderabad, received a bid despite heavy speculation that the Adani Group and the Videocon Group were interested in investing in the Ahmedabad franchise.
However, the deal does not translate into an overall positive valuation of IPL in terms of franchise costs. In 2010, when the BCCI had held the auction, the Sahara group bid a whopping $370m (approx Rs 1,700 crore) for Pune, and a consortium of investors bid $333.5m (approx Rs 1,300 crore) for Kochi, payable over a period of 10 years. If those prices are considered, Sun buying Hyderabad for just Rs 425 crore (valuated at Rs 850 crore for 10 years) can only be termed a steal and a sharp fall in valuation.
Sun was speculated to be in the running to buy the Deccan franchise when DCHL had first floated a tender, under the aegis of the BCCI in September, stating its intent to sell the team. However, despite the speculation, Sun did not turn up at the auction and maintained throughout that it wasn’t interested in bidding for an IPL team. PVP Ventures, which bid Rs 69.03 crore per year for the Hyderabad franchise on Thursday, was the only interested buyer who turned up to bid for Chargers back then.
Sun is learned to have been in discussions with BCCI chief and IPL’s Chennai Super Kings team owner N Srinivasan over the last month before confirming its interest in buying a team by turning up for Thursday’s auction.
A BCCI press release on Thursday said: “Sun TV Network has won the Hyderabad franchise for an amount of Rs 85.05 crore per year. This franchise fee represents a premium of over 100% above the amount paid by DCHL for the Hyderabad franchise in 2008.”
Media reports quoted Sun Group CFO S L Narayanan as saying that “going forward the company will retain a lot of existing talent in Hyderabad franchise. The IPL team will create shareholder value from 2014”. Narayanan also added that his company has already drawn up a business plan. “The current deal will be EPS accretive. The IPL team will be funded out of Sun TV’s cash flows,” he said.