Cricket Indian – In the decade since he founded private equity firm RedBird Capital Partners, Gerry Cardinale has acquired stakes in several sports properties such as Fenway Sports Group, YES Network Yankees and Italian soccer team AC Milan. One of his partners in RedBird, Alec Scheiner, previously worked as vice-president of the Dallas Cowboys of the N.F.L. and later managed the Cleveland Browns.
So both men know quite well what a billion dollar business looks like. However, the sport in which they see the greatest advantage today may be a surprise.
Cricket Indian
“When we first got into cricket, we weren’t experts by any means,” Scheiner said. But the more we studied, the more we realized it was like the N.F.L. I did 20 years ago.”
India National Cricket
This was the reason why in June 2021, RedBird bought a 15 percent stake in Rajasthan Royals, a team that competes in the Indian Premier League, for $37.5 million. The money that has come into the league over the last 15 months suggests that RedBird got a bargain.
Four months after this agreement was concluded, the I.P.L. the expansion team sold for $ 940 million. Eight months after that, the league negotiated new television and digital rights deals worth $6.2 billion.
At more than $1 billion a year, that means India’s top cricket competition — a closed league with just 10 teams — now generates as much annual broadcast revenue as top leagues like the N.F.L. ($10 billion a year), the English Premier League (about $6.9 billion) and the N.B.A. ($2.7 billion).
In terms of per game, the I.P.L., whose season lasts only two months, is now second only to the N.F.L.
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Disney and Sony were among the bidders in the tender for the broadcasting rights last year. CVC Capital Partners, the private equity firm that previously owned the Formula 1 auto racing series, has just added the I.P.L. team for a portfolio that already has interests in rugby and football. Among those he defeated? American owners of the Tampa Bay Buccaneers of the N.F.L. and English football giant Manchester United.
“I’m not sure we thought there would be this much global demand for franchises,” Scheiner said. The value of RedBird’s $37.5 million investment has likely doubled in a year. And with new investors circling, most experts agree that any I.P.L. the franchise is now worth at least $1 billion or more.
That money can be made from cricket in India is a new phenomenon. Back in the 1990s, India’s governing body for sports had to pay state broadcaster Doordarshan to broadcast the national team’s matches. Start of I.P.L. in 2008, all that changed. Teams in the league play Twenty20, a three-hour televised version of the game that has eclipsed the multi-day Test match format that gave cricket its gritty, pedestrian image. I.P.L. matches now attract a domestic television audience of over 200 million.
India’s passion for cricket and the sheer size of its market have attracted the attention of foreign investors. Credit… Indranil Mukherjee/Agence France-Presse — Getty Images
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The rise of the league was rapid. Its architect, Lalit Modi, was a senior official of the sport’s governing body in India, the Board of Control for Cricket in India. Correctly noting that Twenty20 could combine India’s love of cricket with a host of commercial opportunities, he launched a series of unlikely negotiations in late 2007 to build a sporting league from scratch.
He promised a group of the best salaries of cricketers in the world that they do not get anywhere else. He held a high-profile auction to sell the teams to members of India’s business and media elite. And then he convinced Sony to pay $900 million for the broadcast rights for the first 10 years of the league.
“It ticked a lot of boxes from an investment point of view,” said Mustafa Ghouse, director of one of the league’s founding teams, the Delhi Capitals. “It’s a closed league without relegation, so your income is secure regardless of your performance, while costs are limited by the player’s salary cap.”
With these safeguards in place for potential team owners, Modi sold his eight teams for a total of $723 million. Buyers included industrialist Mukesh Ambani and Bollywood actor Shah Rukh Khan. Dismissed by traditionalists as “punch and giggle”, Twenty20 cricket began to be taken seriously.
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RedBird Capital’s investment valued Rajasthan Royals at $250 million. Four months later, the I.P.L. the expansion team sold for almost $1 billion. Credit… Photos by Bangalore News, via Associated Press
Even so, the league’s early existence was often uncertain. The second season had to be moved to South Africa for security reasons. After a power struggle, Modi was expelled from the B.C.C.I. in 2010. Three teams were closed after finding financial difficulties, and two others received multi-year suspensions after senior officials were implicated in match-fixing and illegal betting.
But only after the Supreme Court of India stepped in and appointed a judicial committee to tighten governance rules and rule on conflicts of interest, the I.P.L. has really grown as an investment vehicle.
According to Matthew Wheeler of A&W Capital, which advises on sports investment in India, the Supreme Court’s intervention was “a very important moment”. “Once the Supreme Court passed,” he said of the tournament, “you felt better than before.” The $2.5 billion broadcast rights deal for the 2017 through 2022 seasons — a fivefold increase from the previous deal — only proved his point.
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Wheeler, a former professional cricketer, said his firm has started recommending that clients consider buying the I.P.L. franchise in 2017. “The first one I spoke to said his fund doesn’t cover India,” he said. “The other one was not sure. And the third was CVC, who asked us for help.”
CVC Capital Partners had a presence in India but was not involved in cricket. Wheeler said he spent three years learning everything he could about the I.P.L. and building relationships with team owners and the B.C.C.I. “You have to be patient,” he said. Then in August 2021, the governing body announced that it will expand the I.P.L. up to 10 teams of eight. The auction was underway.
Indian conglomerate, RPSG Group, bought the Lucknow-based franchise for $940 million, while CVC bought the Ahmedabad team for $750 million.
The bids exceeded the B.C.C.I.’s minimum price, which was set at $270 million, as well as RedBird’s valuation of Rajasthan Royals at $250 million, made just four months earlier. It also meant that the value of one franchise in 2022 has now exceeded the total price paid for all eight original teams in the first auction in 2008.
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Among those disappointed were Adani Group, a conglomerate owned by an Indian billionaire, and Lancer Capital, a private equity group led by Avram Glazer, owner of the Buccaneers and Manchester United.
Stars like Rohit Sharma are among the players wooed for the I.P.L. Every year. Credit… Dan Himbrechts/EPA, via Shutterstock
The timing of the league’s expansion was deliberate. A bigger championship meant an increase in the number of games he could sell under the new TV rights deal. The deal that was reached stunned even veterans of the sports industry: $6.2 billion over the next five years, roughly split between domestic broadcast rights and digital rights.
Adam Sommerfeld, sports investment specialist at Certus Capital, said he now believes buying into the I.P.L. it is “unthinkable” for private equity firms and institutional investors.
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“They would be investing in the most popular sport in the second most populous country in the world,” Sommerfeld said. “Even if you just buy and hold, the value of the I.P.L. The teams will clearly get significant value.”
For example, unlike European football, where even the owners of large and historic clubs struggle to make regular profits and where investors in medium-sized and smaller clubs face the annual prospect of punishing financial consequences if they are relegated, the club structure of the I.P.L. means that excesses are practically guaranteed. Media rights and championship sponsorships go into a central revenue pot which is shared equally by the B.C.C.I. and 10 I.P.L. franchises. Teams control all of their local revenue, which includes local sponsorship deals, ticket and merchandise sales, and player salaries—typically the biggest expense of sports teams—are kept at a level manageable.
Calculations by one Indian analyst, K Shriniwas Rao, suggested that teams spent just 35 percent of their central revenue on wages in 2021. Each I.P.L. The team is expected to be profitable in 2021, despite the pandemic requiring games to be played in empty stadiums.
The problem for potential investors now is the lack of opportunities. Even after its expansion, the I.P.L. still only 10 franchises. Sommerfeld says he has a list of “six or seven” existing U.S. professional team owners who have inquired about the I.P.L.
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The only problem, it seems, is that no one who currently owns the team has any interest in parting with it.
A version of this article can be found in the print version , section B, page 8 of the New York edition p
