‘IPL an 8-12 year investment horizon’
MUMBAI: For the first time in IPL’s 14-year history, a global private equity firm—CVC Capital Partners—bought a franchise, the new Ahmedabad team, naming it Gujarat Titans.
CVC has had a strong sports portfolio. It held stakes in Formula 1 (2006-2017) and MotoGP (1998-2006). It currently has stakes in Rugby Six Nations as well as the La Liga where its €2.1 billion investment has faced opposition from the top clubs, Real Madrid and Barcelona. BCCI also took three months to study CVC’s interests in European betting firms before giving clearance. Matthew Wheeler, CEO, A&W Capital, and a former county cricketer who was advisor when CVC won a ₹5,625 crore bid to own the Ahmedabad franchise.
Authorised to speak for the firm, he discusses CVC’s investments, perspective of the cricket market, its betting interests, among other things. Excerpts:
Can you talk about your planning before entering the Dubai auction room?
CVC is a big investor in world sport. One area they have been looking at for 3-4 years is cricket. Inevitably, it brings you to India and IPL. CVC had done work all these years in understanding IPL, cricket in India and the world. We met a lot of team owners and BCCI and just listened to understand the success of IPL. We hired two global media agencies to assess where they felt the IPL media rights might go. Going into the auction, CVC had an in-depth picture on what was going to happen to the rights and sponsorships.
How far do you see the new media rights value going?
We will all see in the next couple of months. Everybody expects it to at least double from the current ₹16,000 crore. I suspect it will be significantly higher. You have clearly got a number of players (media) who are interested in IPL rights. The league is growing and growing, and now you have 10 teams, more games.
It takes time to break even in IPL and some say the price you paid was not fair value?
A number of factors went into it. The past franchises started making profits as the media rights revenue rose. We expect to see the same pattern over the next 10 years. Bear in mind that CVC were not the highest bidder (Lucknow fetched more) and were not much higher than the second highest bidder—5-10% higher than the third bidder and Mr Sanjiv Goenka (Lucknow Super Giants owner) pitched it 20% higher. So, CVC felt they pitched it exactly right.
Companies, business houses enter IPL for different reasons. What were CVC’s?
CVC is very clear. They are a financial investor and have invested in IPL to grow and develop the team. But ultimately, they will pass it on to another owner, sell it. They are not going to be owning the franchise in 30 years. They do have a medium to long term view. This is an 8-10-12-year investment horizon for them. You look at their history in sports properties. They stayed for 12 years in F1. It takes time to build value, particularly in this case where it’s a brand-new franchise. In October, CVC bought the right to create a team and rent a stadium with GCA in Gujarat; they didn’t buy a team. They have invented a brand, launched a logo, employed management, coaches, players. Now, it’s up and running and about to start. The reason they went into IPL is because it is the premier cricket league in the world by some distance. As the Indian economy grows and IPL becomes more important, the value is going to grow. It’s the No.1 sports league in the world for the world’s biggest of economies. Those are the sort of macro trends that CVC identified.
Though CVC deals with sport, owning a franchise is a first.
It’s slightly different for CVC to run a team as opposed to buying stakes in leagues. It’s learning. If BCCI is interested in selling a part of the league, I am sure they would be very interested in that discussion.
IPL revenue share covers most of your costs. How important is it to own a winning team?
The purpose of a sports team is to win matches. CVC is very clear that a sports franchise is all about the players. You are trying to build a team that can be competitive every year. The reason Manchester United, Real Madrid, Mumbai Indians and Chennai Super Kings are successful is because they win more than the others. That’s the best marketing you can do to build a brand.
The delay in getting the Letter Of Intent must have caused anxiety?
BCCI did a thorough process post auction. It was slightly frustrating for us. I was part of a small transition team that was setting up that franchise and we couldn’t do much until the Letter Of Intent was signed. In the end, it all worked out. BCCI and India generally are satisfied that CVC’s other interests are completely different to what they are doing in the cricket league.