"Calculations were done and reworked for months. Multiple scenarios were discussed on price and breakeven points. As per the calculations, at this price, the franchise will break even in year 12. We had scenarios planned for 15 years too," said one of the persons close to the development.
Earlier, Goenka had told ET that it was a fair value as Uttar Pradesh is a big and significant market for RPSG Group and owning a team here will help the group connect with consumers.
) may have surprised and shocked many in the industry but for Goenka owning a piece of India's richest sporting league made a compelling business case.
People close to Goenka told ET that he was clear from the beginning that he wanted the team, "at any cost" because he believed in the marquee property.
"Calculations were done and reworked for months. Multiple scenarios were discussed on price and breakeven points. As per the calculations, at this price, the franchise will break even in year 12. We had scenarios planned for 15 years too," said one of the persons close to the development.
Agencies
Sports marketing experts believe that for both Goenka and CVC Capital, which won Ahmedabad with its ₹5,625 crore bid, breakeven will depend on media rights deals.
"The two new IPL teams surely have come up with magical numbers and it's great for cricket in India and its financial domination globally," said Tuhin Mishra, MD, Baseline Ventures. "It will be interesting to see how things pan out for these two teams as the breakeven will surely depend on what the new media rights value go for after a year."
The calculation is based on revenue projections from the share in the central revenue pool of the IPL as well as other revenue streams, which include sponsorships, gate revenues, F&B and licencing.
The cost, apart from the franchise fee, includes the players' cost, management and operations cost, and marketing spends.
While Goenka will have to pay ₹709 crore per year for the next 10 years as franchise fee, the BCCI will also pay him a share from the central revenue pool.
"For the first year, it will be close to ₹200 crore, but it will increase in the next two rights cycles - year 2023-27 and year 2028-2032," said a senior sports consultant. "Effectively, the payout in the first year will be ₹500 crore, but will decrease over the years."
Earlier, Goenka had told ET that it was a fair value as Uttar Pradesh is a big and significant market for RPSG Group and owning a team here will help the group connect with consumers.
Talking to ET NOW, Goenka said that while he was not looking at any partnerships at this stage, the option to offload stake over a period of time is always there.
He also said he was also looking at a valuation of over ₹10,000 crore for the team in the next 5 years.
Under the franchise agreement, the Board of Control for Cricket in India (BCCI) keeps 50% of the revenues earned from the media rights and ground sponsorships, while putting 45% in the central revenue pool - to be divided equally among all the teams - and distributes the remaining 5% among the winners. Under the current rights cycle, all franchises were getting close to ₹215 crore from the central revenue pool.
Agencies
