IPL (Indian Premiere League) Cricket is becoming more and more popular day by day. In the article few weeks back, I have told you that IPL Cricket Teams are the New Asset Classes (Exotic Assets).
Rich people Invest in IPL Cricket Teams for higher profits. IPL Cricket Teams are the Assets just like any other Assets such as Stocks, Bonds, Gold, Real Estate, Mutual Funds, Businesses….etc….
You Can buy IPL Cricket Teams today & Sell it for higher profits (300-1000%) in the future.
Right now there are total 8 IPL Cricket Teams & 2 will be added in the near future. Big Business Tycoons have Invested in these Exotic Assets from US $ 50-120 Millions.
Now according to Financial Results published last year, only 2 out of 8 IPL Cricket Teams (Rajasthan Royals & Kolkata Knight Riders) have made a marginal profits (Rs.6 Crores & Rs.13 Crores). Rest of the 6 IPL Teams have made a loss of around Rs.2-45 Crores.
So Now the Question is, “Are IPL Cricket Teams a Good Investment for these Business Tycoons or are they Loss Making Assets?”
Let us first discuss that, who has invested how much money in buying each IPL Cricket Team?
Franchise(IPL Cricket Team) | Owner(s) | Price (US $) |
Mumbai Indians | Mukesh Ambani (Reliance Industries) | $ 111.9 M |
Royal Challengers Bangalore | Vijay Mallya (UB Group) | $ 111.6 M |
Hyderabad Deccan Chargers | Deccan Chronicle | $ 107 M |
Chennai Super Kings | India Cements (N Srinivasan) | $ 91 M |
Delhi Daredevils | GMR Holdings (Grandhi Mallikarjuna Rao) | $ 84 M |
Kings XI Punjab | ess Wadia (Bombay Dyeing), Preity Zinta, Mohit Burman (Dabur) | $ 76 M |
Kolkata Knight Riders | Red Chillies Entertainment (Shah Rukh Khan, Gauri Khan, Juhi Chawla and J Mehta) | $ 75.1 M |
Rajasthan Royals | Emerging Media (Lachlan Murdoch, A.R Jha and Suresh Chellaram), | $ 67 M |
So over all in the each team there is an Investment of anywhere between US $ 65-112 Millions.
Now after Investing this much amount of Money, Let us Discuss that How much was the Income, Expense & Cash Flow (Income – Expense or Net Profit) of each team.
Now there are 3 main Income sources of these Cricket Teams & 3 main Expenses of these teams.
Income -
a. Broadcasting Rights
b. Team Sponsors
c. Gate Receipts
Expenses -
a. Franchise Fees
b. Team Expenses
c. Advertising & Admin
Here is a Table of each IPL Cricket Team (Franchise) Earnings -
IPL Team | Income (Revenues) | Expenses | Profit/Loss (Rupees Crores) |
Mumbai Indians | a. Broadcasting Rights - 35 b. Team Sponsors - 20 c. Gate Receipts - 14 Total Revenues(a+b+c) - 69 | a. Franchise Fees - 45 b. Team Expenses - 20 c. Advertising & Admin - 20 Total Expenses(a+b+c) - 85 | Net Loss - 16 |
Royal Challengers Bangalore | a. Broadcasting Rights - 35 b. Team Sponsors - 0 c. Gate Receipts - 10 Total Revenues(a+b+c) - 45 | a. Franchise Fees - 48 b. Team Expenses - 22 c. Advertising/Admin - 18 Total Expenses(a+b+c) - 88 | Net Loss - 43 |
Hyderabad Deccan Chargers | a. Broadcasting Rights - 35 b. Team Sponsors - 17 ; c. Gate Receipts - 12 Total Revenues(a+b+c) - 64 | a. Franchise Fees - 45 b. Team Expenses - 24 c. Advertising/Admin - 13 Total Expenses(a+b+c) - 82 | Net Loss - 18 |
Chennai Super Kings |
| a. Franchise Fees - 36 b. Team Expenses - 24 c. Advertising/Admin - 13 Total Expenses(a+b+c) - 73 | Net Loss – 0.2 |
Delhi Daredevils | a. Broadcasting Rights - 35 b. Team Sponsors - 20 c. Gate Receipts - 15.4 Total Revenues(a+b+c) - 70.4 | a. Franchise Fees - 34 b. Team Expenses - 23 c. Advertising/Admin - 20 Total Expenses(a+b+c) - 77 | Net Loss 6.6 |
Kings XI Punjab | a. Broadcasting Rights - 35 b. Team Sponsors - 22 c. Gate Receipts - 9 Total Revenues(a+b+c) - 66 | a. Franchise Fees - 30.4 b. Team Expenses - 25 c. Advertising/Admin - 13 Total Expenses(a+b+c) - 68.4 | Net Loss –2.4 |
Kolkata Knight Riders | a. Broadcasting Rights - 35 b. Team Sponsors - 34 c. Gate Receipts - 20 Total Revenues(a+b+c) - 89 | a. Franchise Fees - 31 b. Team Expenses - 25 c. Advertising/Admin - 20 Total Expenses(a+b+c) - 76 | Net Profit - +13 |
Rajasthan Royals | a. Broadcasting Rights - 35 b. Team Sponsors - 16 c. Gate Receipts - 8 Total Revenues(a+b+c) - 59 | a. Franchise Fees - 27 b. Team Expenses - 13 c. Advertising/Admin -13 Total Expenses(a+b+c) - 53 | Net Profit – +6 |
So above is the Revenue Table of each IPL Cricket Team.
At a first look, it looks unprofitable. means each Franchisee has made a loss except the last 2.
So it means that, IPL Cricket Teams are not a Profitable Investments…Right?.
I have also thought in the same way just like you. Because at a first look, they look loss making. But after that I thought that, Well………. If I was a Business Tycoon like Mukesh Ambani & Vijay Mallya than will I make an Investment that will make a Loss?……. Certainly Not……….
So I analyzed the Table again……. And some surprising unanswerable questions strike into my head.
One surprising question came into my mind was that, “Have you observed that each teams Team Expense is widely different. Rajasthan Royal’s Team Expense is only Rs.13 Crores while Chennai, Delhi & Punjab’s Teams' Team Expense is almost Rs.25 Crores. While Rest of the team have shown a team expense of Rs.20 Crores. So my question is that, what they have bought from Rs.25 Crores for a Team?……….. Bats & Pads?………….. IPL 2008 was played in the India only means domestically. and each team is roughly of 15 players. The Highest quality Cricket Kits in the market are available for around Rs.3-4 Lakhs. Now suppose we think that they have bought a Cricket Kits for Rs.10 Lakhs each for each cricket player than the total expense will be Rs.1.5 Crore per team. Than what is the rest 23 crores expense?”
Another thing is that, Rajasthan Royals some how managed to afford a team for just Rs.13 Crores while other teams have maintain their teams for whooping Rs.25 Crores……….
Not only this but according to me Rs.13 Crores is also a high expense for 20-20 Cricket. In the old days, 50-50 & even test matches were held by 10 times less expenses than this. So What these teams are spending behind?
Why Team Expenses is 20-25 Crores? Even if you arrange the accommodation of players in 7 star hotels for 2 months than also the team expense can’t reach 20-25 crores. Team Expense can never be 20-25 Crores even if you play a 5 day test match or a World Cup.
Than why the team Expenses of these Business Tycoons is in Crores?
A Big Question Mark……………….!!!!!!!!!!
Anyway………. Can you give me some logical reason for my above questions?……….
Otherwise, I don’t think that Investing in IPL Cricket Teams is a Loss making Business. According to me, these are the artificially inflated Expenses to avoid Taxes. Instead of paying Tax to the Government, why don’t spend all of that money behind enjoyment & Fun?……… I think this is the Logic behind a huge On paper Losses of IPL Cricket Teams.
What do you think?……….
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