MUMBAI, Feb 17 (Reuters) – Global private equity traders like KKR and Blackstone have a brand new investment hotspot in India: cricket.
The Indian Premier League, the world’s richest cricket league, counts Bollywood stars, Indian tycoons and spirits maker Diageo amongst its backers, however is now attracting main private equity firms with the prospect of quickly rising income and income and big viewership globally.
The enterprise worth of the league, popularly known as the IPL, surged to a report $18.5 billion final yr, U.S.-based investment financial institution Houlihan Lokey says.
That is a lot smaller than America’s Nationwide Soccer League (NFL) valued at $227 billion and the Nationwide Basketball Affiliation (NBA) price $165 billion, however on a per-match foundation the IPL is now the world’s second-most invaluable sports activities league after the NFL.
KKR and Blackstone are eyeing stakes in the winner of final season, Royal Challengers Bengaluru (RCB), two banking sources mentioned. KKR can also be reviewing a doable stake in the Rajasthan Royals group, whereas Swiss-based PE agency Companions Group is contemplating not less than one group for investment, sources mentioned.
It was a blockbuster IPL deal by European private equity agency CVC Capital that triggered the brand new wave of curiosity amongst traders, bankers say. CVC bought a majority stake in the Gujarat Titans, netting a return of greater than 350% in greenback phrases simply 4 years after buying it. The deal valued the group at $900 million.
“India’s structural financial development ought to proceed to help long-term worth creation,” mentioned Siddharth Patel, a managing companion at CVC Capital.
“Mixed with the shortage of IPL franchises, it’s clear why there’s such intense investment curiosity from each industrial teams, household workplaces and private equity traders.”
For the reason that CVC deal, a number of enquiries have come in from private equity shoppers in the U.S. and Europe for IPL stakes, mentioned Harsh Talikoti, a sports activities offers specialist at Houlihan Lokey in Mumbai.
“The IPL mannequin proved you may generate severe revenue,” he mentioned.
Blackstone, KKR, Companions Group and Royal Challengers Bengaluru declined to remark, whereas Rajasthan Royals didn’t reply to Reuters’ requests for remark. The sources declined to be named because the talks are private.
Centralised Pool and Broadcast Rights Bounty
The IPL has reshaped the sport in a rustic the place the highest cricketers are sometimes worshipped. Final yr, IPL had a report 1.19 billion viewers throughout digital and TV, far bigger than the NFL.
Annually after an public sale for global gamers, IPL groups compete in matches in the 20-over format of the sport. The subsequent season begins March 26.
Key components driving investor curiosity in the league are a doubling in the worth of broadcast rights to greater than $6 billion in the newest public sale in 2022, rising franchise revenues and the Indian cricket board BCCI’s pooled revenue-sharing mannequin that bolsters group revenues.
The board swimming pools media rights and league sponsorship funds, retains half, and distributes the remaining equally among the many groups – a construction way more centralised and evenly shared than, say, in the NBA.
The mannequin ensures every group is well-funded to amass gamers, and with common participant auctions, any group can contend for the title in a season, CVC’s Patel mentioned. That helps “keep sturdy viewers engagement and gives franchises with predictable economics by means of the media rights cycle.”
Mohit Burman, an Indian businessman who co-owns the Punjab Kings group with Bollywood star Preity Zinta, mentioned his sponsorship income grew 30% a yr, however the important thing lure for private equity firms was the revenue-sharing mannequin.
“The IPL can definitely rival – and in some circumstances outperform – U.S. leagues on investor returns, even when absolutely the scale differs,” Burman advised Reuters.
Each IPL franchise earns round $55 million alone from the board’s pool yearly, he mentioned. Ticket gross sales and other sponsorship earnings are on high of this.
“The asset class has clearly come of age,” Burman mentioned.
The BCCI and other IPL groups didn’t reply to Reuters’ queries.
The Investment Dangers
Reliance and Disney merged their India companies in 2024, and now collectively personal the streaming and TV broadcast rights for IPL till 2027 which value $6.2 billion. Jefferies analysts say the per-match worth simply on these rights makes IPL the second-highest valued globally after the NFL.
However there are dangers for traders, too.
With comparable leagues discovering traction in South Africa, UAE and Australia, cricketers should navigate an more and more crowded franchise calendar alongside their worldwide commitments.
The most important overhang is the fear that the Disney-Reliance merger will imply much less competitors and will end result in fewer {dollars} for groups in the 2027 broadcast public sale.
Indian billionaire Sanjiv Goenka does not agree. He mentioned in an interview final yr that his 2021 acquisition of an IPL group for $781 million is a “trophy enterprise” and broadcast rights will solely get pricier.
Many traders, together with Goenka’s Group and Mukesh Ambani’s Reliance, guess a complete of 500 million kilos final yr in the England and Wales Cricket Board’s hundred-ball league.
Rising Staff Revenues
The NFL opened its groups for private equity traders in 2024, and the NBA permits such investments however with strict possession caps. IPL has no such limits, allowing higher private capital play.
Staff income, earnings development and the restricted variety of groups are huge allures. There are 10 groups in the IPL, in comparison with 32 in the NFL.
A Reuters evaluation of regulatory disclosures confirmed not less than 5 IPL groups greater than doubled their income, on an absolute foundation, since 2022, with two of them even doubling their income. Three other franchises additionally recorded a doubling of income – however not income – in the interval.
Kolkata Knight Riders, part-owned by Bollywood star Shah Rukh Khan, reported income of $76.8 million for 2023-24, up 119% from the earlier yr. Web revenue rose six occasions to $19.4 million.
Sumat Chopra, private equity head at consultancy Kearney which has suggested shoppers on the IPL, mentioned there’s extra upside as marquee gamers bolster group revenues. Prime gamers like India’s Virat Kohli and Australia’s Pat Cummins play the IPL.
“IPL franchise valuations are more likely to compound steadily over time, supported by rising media economics.” ($1 = 90.7500 Indian rupees)
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