When Sanjiv Goenka's RPSG splurged approximately USD 947 million - almost a billion dollars - to acquire the Lucknow franchise on Monday, it wasn't just about how far IPL has come as a financial behemoth. How far can the world's fastest-growing sports league go was the more interesting question.
Even the USD 750 million that private equity group Irelia Co Pte Ltd (CVC Capital Partners) paid for the Ahmedabad franchise tempts one to turn to when IPL was launched in 2008. The Mumbai Indians franchise, the most expensive of the original eight teams, was acquired for USD 111.9 million with Rajasthan Royals, the least expensive, snapped up for USD 67 million.
Cricket has been recession-proof in India over the past two decades. And T20, constantly evolving and which has overshadowed the other two formats, has installed IPL among the best sports leagues in the world.
On Monday, asked if his group's massive bid would be economically viable, Goenka was quoted as saying by PTI: "We do believe that the valuation of this will go up in the future. And from what we invest, to what it could be over a period of 10 years would be a multiple of a few times."
That projection would explain why he will be paying almost a billion dollars over 10 years for a franchise. For comparison, Premier League club Newcastle was acquired by Saudi's Sovereign Wealth Fund for $400 million earlier this month.
The website Athletic Panda, on the basis of average annual revenue, places IPL fourth in the list of the world's top sports leagues in 2020. US leagues NFL (USD 13 bln), MLB (USD 10 bln) and NBA (USD 7.4 bln) are followed by IPL (USD 6.3 bln). EPL (USD 5.3 bln) is next.
IPL's growth will be further strengthened if it fetches a projected ₹30-35,000 crore for broadcast rights in the 2023-27 period. The current rights for 2018-22 by Star India is worth ₹16,347 crore, which assures ₹54.60 crore per match. BCCI is expected to release the media rights tender soon. As per industry estimates, IPL accounts for 40% of cricket's global revenue.
The IPL was conceived on the lines of the US leagues, and their biggest strength is the home-bred athletes. IPL is steadily moving in that direction with the depth provided by Indian players, including uncapped domestic cricketers, allowing teams to even keep out foreigners from the playing 11.
Joy Bhattacharjya, former director of Kolkata Knight Riders, sees the big money buys as a long-term investment. He says the trend of private equity firms taking up stakes in sports globally will only go up.
"The one great thing is they get rights to perpetuity (in IPL). For someone like Sanjiv Goenka, the time frame in IPL is large. They are not looking for immediate profits; they are looking at 10 years and beyond. It's amazing how the league has grown.
"The important thing is more and more private equity firms are coming in, investing in sports. Look at CVC, they have invested in volleyball, which is a billion-dollar thing."
In 2020, CVC and the International Volleyball Federation formed Volleyball World with a USD 300 million investment from the firm.
"Sports is a driver. Investments are not just about passion for sport, shelf life of the product is long. Private equity firms, they know sports provide value in terms of global exposure, teams like say Man United with a global footprint. They are reaching a worldwide audience. And Asia is the fastest growing in sports," he says.
Bhattacharjya says IPL will continue to expand.
"Once you reach 10 teams, you can't really expand. But there are other ways. You can start a second-tier IPL, take it to 10 smaller cities. In 2-3 years, women's IPL is likely to start, there can be other products around the league."