MUMBAI: The city of pearls will continue to have its own Indian Premier League franchise. Chennai-based media and television group Sun TV Network, owned by the powerful and politically savvy Kalanithi Maran, bought the (IPL) Hyderabad franchise in an auction, on Thursday, for Rs 425 crore (approx $80m), payable in the next five years at Rs 85.5 crore (approx $16m) per year.
Sun TV's bid was one of the only two offers that came in for Hyderabad on Thursday, when the IPL Governing Council met in Mumbai to open the bids after floating a tender for 12 cities early this month. Hyderabad-based PVP Ventures, promoted by Prasad V Potluri, was the other bidder at Rs 69.03 crore (approx $13m), Rs 16 crore less than what Sun bid for the team.
Noida-based Jaypee Group were in race to bid for a franchise and had requested the BCCI to allow the team to be based out of Kanpur until a stadium could be constructed in Noida in due time, if they won. However, Jaypee's bid did not come in.
The bids for the new franchise had been invited by the BCCI through a tender floated early this month for 12 cities that included Ahmedabad, Cuttack, Dharamsala, Indore, Kanpur, Kochi, Nagpur, Noida, Rajkot, Ranchi and Visakhapatnam, other than Hyderabad.
Sun Network will now replace the debt-ridden Deccan Chronicle Holdings Ltd (DCHL) in Hyderabad, parent company of the franchise Deccan Chargers, which was terminated by the BCCI for delaying player payments and mortgaging the franchise with private banks, against the rules of the IPL. Sun paid the BCCI an immediate signing deposit of Rs 20 crore after winning the bid in Thursday's auction.
DCHL had bought the Chargers in 2008, IPL's first ever franchise auction, for a handsome price of $107m (Rs 421 crore), payable at $10.7m (Rs 42.01 crore) per year over a period of 10 years.
Until IPL 5, DCHL had finished paying the BCCI $53.5m (Rs 210.05 crore) and an exact amount was remaining to be paid before the franchise fell into financially troubled waters.
This means, Sun is paying almost the double of what the Chargers were going to pay the BCCI in the next five years as instalments for buying the franchise. However, it certainly does not mean anything positive to the overall valuation of IPL, in terms of franchise costs.
In 2010, when the BCCI had held the auction, the Sahara group bid a whopping $370m (approx Rs 1700 crore) for Pune, and a consortium of investors bid $333.5m (approx Rs 1300 crore) for Kochi, payable over a period of 10 years.
If those prices are considered, Sun buying Hyderabad for just Rs 425 crore (valuated at Rs 850 crore for 10 years) can only be termed a steal and a sharp fall in valuation.
Sun was speculated to be in the running to buy the Deccan franchise when DCHL had first floated a tender, under the aegis of the BCCI in September, stating its intent to sell the team.
However, despite the speculation, Sun did not turn up at the auction and maintained throughout that they weren't interested in bidding for an IPL team. PVP Ventures, who bid Rs 69.03 crore per year for the Hyderabad franchise on Thursday, were the only interested buyers who turned up to bid for Chargers back then.
The winning price, quoted by Sun, is being termed as a "steal" within the IPL fraternity, who despite having bought the franchise in 2008, are still paying similar money as installments for some of the teams.
A BCCI press release on Thursday said: "Sun TV Network has won the Hyderabad franchise for an amount of Rs 85.05 crore per year. This franchise fee represents a premium of over a 100 % above the amount paid by DCHL for the Hyderabad franchise in 2008."
Media reports quoted Sun Group CFO SL Narayanan as saying that "going forward the company will retain a lot of existing talent in Hyderabad franchise. The IPL team will create shareholder value from 2014."
The BCCI had floated a tender for a new IPL franchise after terminating Deccan Chargers on September 15.
However, DCHL had challenged it in the Bombay high court first where the plea was dismissed after they failed to furnish a bank guarantee of Rs 100 crore. DCHL later approached the Supreme Court where once again their plea was dismissed.
Sun shines on BCCI's IPL fortune
Sahara paid 170 crore a year for Pune Warriors for 10 years, Kochi Tuskers was bought for 153cr a year and Sun is paying 85 crore a year (at 425cr for 5 years). Deccan Chargers were obliged to pay BCCI 210cr at 42cr a year for the next 5 years.
First BCCI franchise auction (2008)
Mumbai Indians 441cr (Reliance Industries); Royal Challengers Bangalore 440cr (UB Group); Deccan Chargers 421cr (DCH Ltd); Chennai Super Kings 360cr (India Cements); Delhi Daredevils 330cr (GMR Group); Kings XI Punjab 300cr (Preity Zinta, Ness Wadia, Dabur); Kolkata Knight Riders 295.6cr (Red Chillies Entertainment); Rajasthan Royals 263.7cr (Emerging Media Group)
Second franchise auction (2010)
Pune Warriors 1,702cr (Sahara Group); Kochi Tuskers Kerala 1,533cr (Rendezvous Sports Pvt Ltd)
What happens to DC players?
Their contracts with Deccan Chargers last until 2013, or IPL 6. Sun will choose the players it wants. BCCI will take a call on the rest. Current set could be sent to BCCI's fresh players' auction pool in 2014.
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