Delhi Daredevils, Rajasthan Royals promoters look to offload stakes

Delhi Daredevils and Rajasthan Royals, two of the high-profile teams in the Indian Premier League (IPL) — the popular Twenty20 cricket tournament — may see changes in ownership.

Delhi Daredevils, controlled by the Hyderabad-based GMR Group, has appointed Kotak Mahindra Bank while Rajasthan Royals, owned by Emerging Media, is using the services of PricewaterhouseCoopers to find new investors as the owners of these teams seek to cash in on increasing valuations even as the third season of the IPL gets underway from March 12, according to three persons familiar with the situation.

B Vanchi, a director at GMR Sports, a company owned by the promoters of GMR Group, said he has no comments on the matter. Arun Raste, a senior vice-president at Kotak Mahindra Bank, said: “As a policy, we do not talk about business of an individual client and have no comments on this issue.”

But one of the persons with knowledge of these transaction said GMR Sports is looking at a valuation of around $300 million. It had purchased the team for $84 million in the initial auction held by the Board of Control for Cricket in India (BCCI) in 2008. The GMR Sports chairman is Srinivas Bommidala, the son-in-law of GM Rao, the head of the group that bears his name.

Manoj Badale, the CEO of Rajasthan Royals, denied there was a move to sell the Jaipur-based team which had won the first IPL tournament in 2008. “This is completely unfounded and we have no plans to work with PwC,” Mr Badale said. PwC could not be reached for comment.

However a person familiar with the situation said that the owners of Rajasthan Royals are looking at valuations of close to $200 million and PwC is engaging in talks with “serious buyers” on behalf of Emerging Media, which had bought the team for $67 million.

Both transactions were at an early stage and may not be consummated, persons familiar with the proposed deals said. But it was also possible that the existing owners may choose to exit altogether, they emphasised.

Last year, Rajasthan Royals had offloaded around 11.7% stake in its team to Raj Kundra, a London-based businessman, and his wife and Bollywood actor Shilpa Shetty. At the time of the stake sale, Emerging Media officials had said that the team was valued at $140 million.

Each franchisee is likely to have generated gross revenue of Rs 60-75 crore from the last season of the IPL — which was held in South Africa because it coincided with general elections in India — according to industry officials. All the IPL teams are currently closely held.

“For us, this is like any other business and we are always looking at creating value. Valuations are high at this point and therefore we think this is the right time to exit,” said a franchisee owner who is looking at selling out.

But some bankers said on the condition of anonymity that the expectations of the team owners were too high and it was unlikely that they will get the kind of money they want. If deals were to happen expectations will have to be pared down, they said.

So far, several IPL teams have tested the waters by trying to sell stakes, but have been disappointed by lower-than-expected valuations. Only Rajasthan Royals managed to induct new investors while some others like Deccan Chargers, Kings XI Punjab and Kolkata Knight Riders have been scouting for strategic investors.

“There is a lot of hype around how valuations will soar, but it’s these expectations that have hindered stake sales so far,” says a banker. Revenue streams for teams flow from their share of broadcast rights, sponsorships, stadium tickets and merchandise sales.

The eight-team IPL league will add two new teams in its fourth season. The reserve price for bids for the new teams have been set at $225 million, up from $50 million at the time of initial auctions two years ago.

In the initial auction in 2008, the BCCI generated millions of dollar of revenues selling teams ‘representing’ different cities and states in India, mimicking the structure of football leagues such as the English Premier League or the major US sports such as baseball.

In the auction, Vijay Mallya’s UB group had won the franchise for Bangalore at $111.6 million, Mukesh Ambani, the owner of Reliance Industries, got the one for Mumbai at $112 million while Deccan Chronicle won the franchise for Hyderabad team at $107 million.

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