According to market experts, the teams are expected to shell out in the “range of 500 to 600 crore INR” per team in the closed-bid auction.
“WIPL has huge potential but most of the legacy teams would like to mix optimism with pragmatism,” an industry insider, who has previously worked on men’s IPL team bid, told PTI ahead of auction.
“Expect a few bids in the range of Rs 500 crore upwards. Rs 800 crore plus could be a bit ambitious but BCCI won’t complain,” he added.
More than 30 odd companies have bought the bid documents worth Rs 5 lakh including all the 10 men’s IPL team. Well-known corporate houses such as Adani group, Torrent group, Haldiram’s Prabhuji, Capri Global, Kotak and Aditya Birla Group have also shown interest in buying a team.
Some of these companies were unsuccessful when BCCI invited bids for two new men’s teams in 2021.
Among the traditional IPL teams, Mumbai Indians, Rajasthan Royals, Delhi Capitals, KKR could seriously contemplate to add to the bouquet of their already existing men’s teams across the globe.
According to market insiders, there are two principles on which these bids are placed by the business houses.
First one is “Return on Investment” (ROI), which is the core principal of any business. It is profit on what an entity spends.
The second one isn’t a business principle as such but in business community they call it “Return of Ego”.
This is something where some of the biggest business names are ready to shell out any amount if they have their eyes on buying a particular property. Even if it takes five to seven years for touching breakeven point.
It’s about wanting to purchase something at any cost
An existing IPL franchise with its “steady revenue stream” in place can afford to “bleed” a bit more in initial years which is imperative.
A former IPL franchisee official, who had once worked on bids, explained the rationale which goes into the bidding.
“Let’s say, a franchise makes a winning bid of Rs 500 crore for a period of five years. Now that’s Rs 100 crore committed straightaway for each of next five years,” the source explained.
Now what will be source of earning for the franchises?
“The BCCI distributes its media broadcast revenue which is one of the major earning chunk. The second is a share from BCCI’s central pool of sponsorship. The third is a franchisee’s own set of sponsorship earnings. Fourth is gate sales, money earned from tickets,” he elaborated.
So what could be a franchisee’s earning from WIPL’s media revenue pool.
“The BCCI in case of Women’s IPL is going to share 80 percent of media rights money with the teams (in case of men, it’s 50:50) to help them develop a sustainable model.
“So what will be the mathematics over here? JIO has brought media rights for five years at Rs 950 crore (approx) which is roughly Rs 190 crore per year. So 80 percent of 190 crore is 152 crore.
“Let’s make it a round figure of Rs 150 crore. That’s what each franchise gets over a period of five years which approximately Rs 30 crore per annum,” he explained.
“Now BCCI will also distribute a chunk of its central pool of sponsorship (title sponsor, co sponsors, various award sponsors) also with franchise. Add to it franchisee’s own revenue pool also. So it could be anything between Rs 15 to Rs 18 crore per year. Gate sales won’t earn you a great deal in first year,” he said.
So the per year earning for a team is expected to be Rs 50 crore.
Now apart from Rs 100 crore franchisee fee per year, what will be the other expenses.
“There is a salary cap of Rs 12 crore for the squad. Add another 6 to 8 crore on salary of support staff. Let’s make it Rs 20 crore. Add the hotel expenses, fees paid to state associations for stadium and other operational costs. It could be anything between Rs 6 to 8 crore. First year single city would reduce expenses.
“So the cumulative expenses per year could be Rs 128 to Rs 130 crore. The earnings would be around Rs 50 crore. So there is a chance during first few years, there would be a loss of Rs 50 crore or more,” he explained.
Herein lies the catch.
“The legacy franchises (MIPL) are better placed to offset these losses as they are already making profits after 15 years of IPL. They will club their men’s and women’s team together and perhaps quickly make the profit zone,” the official added.
The five-team WIPL will be played in the month of March in Mumbai at a couple of venues.