Indian Premier League March 22, 2010

New franchises will make profits - Lalit Modi

Cricinfo staff

Lalit Modi, the IPL commissioner, has expressed surprise at the staggering bid amounts for the two new franchises but was confident the investment in the new teams would yield profits for the respective owners.

The Sahara group, the biggest patron of sports in the country, won the rights to the Pune franchise for US$370m. The other new franchise is a consortium of five companies called Rendezvous Sports World, which bid US$333.33m for Kochi. The cost of the two franchises exceeds the total value of the original eight franchises.

"I was indeed a little bit surprised by the amount. Honestly speaking, I thought the winning bid would be USD 300-320 million. So it was USD 40-50 million higher than my expectation. The bidders must have done their numbers well," Modi was quoted as saying by PTI. "We are just two years old and every team that has been run well must be making a profit. If not, they are probably marginally short of it."

Subrata Roy, the chief of the Sahara group, said the value of his bid for Pune was justified though he wasn't sure when the franchise would break even. "Right from the Indian Premier League's first match this season, the eyeballs it has got is huge worldwide," Roy told The Economic Times. "Naturally, the valuations have risen exponentially from what it was three years ago. So, we believe the bid we placed is justified. While there will be operating profits from year one, there will be no cash flow. It's difficult to say by when we will break even."

Roy had initially planned to bid for Lucknow as a new franchise, but Pune's infrastructure for cricket and the Sahara-built township of Aamby Valley, located in the city, prompted the final decision. "We did want to bid for Lucknow but we were advised by the Indian Premier League to consider bidding for Pune as it made sense in terms of logistics and infrastructure," Roy said. "The new stadium coming up in Pune is one of the world's best. Also we have the advantage of cross-leveraging the resources of Aamby Valley."

Roy also told the Times of India that "a few Indian cricketers had suggested that Sahara should buy an IPL team." "Since we share an emotional bond with these players, we had to buy a team. Soon, we will start planning and by September everything will be in place for sure." He added that Sahara had not bid in the first auction because of stringent clauses in the tender document.

Following the success of the first two seasons, Modi said the IPL brand was gaining popularity across the globe and adding more patrons to its existing fan base. The scope for expansion, he said, was greater given the potential for greater revenue compared to many other sporting leagues. "Sports is one of the leading businesses of the world today. English Premier League, NFL, NBA, Spanish League, Bundesliga -- these capture the imagination of the youth and the people. Build a strong base and your future is defined.

"We already have some pluses. Across the world, the major cost is of infrastructure and players' salary. Here you get the stadium pretty much free and there is a cap on players' salary as well.

"Merchandising and ticketing are two other revenue sources. The ticketing revenue of all teams have gone up six-seven folds. With YouTube and Google in the picture, fan base is increasing across the world."

The IPL, now having expanded to 10 franchises, could feature 94 games next year if it retains its current format. When asked if the increasing workload would exact a heavy toll on the players, Modi said: "See, you have 300 matches in EPL every season. I don't see any fatigue factor. Currently every team plays 14 matches, they will play 18 from next year. We are cutting down on the travelling. It's travelling which is the biggest issue, not playing matches.

"We are aiming to be like the NBA and NFL and the day is not far, considering how we are going."

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