The Sanjeev Goenka-owned New Rising consortium and mobile phone manufacturer Intex have won ownership rights of the two new franchises in the IPL. New Rising have picked Pune as their home base, while Intex have opted for Rajkot.
New Rising bid Rs minus 16 crore while Intex quoted minus 10 crore in the reverse bidding process through which the new franchises were chosen.
In a short media briefing, IPL chairman Rajiv Shukla said a total of five bidders had entered the fray to bid for the ownership rights of the two new franchises that would replace Chennai Super Kings and Rajasthan Royals, who were both suspended for two years by the RM Lodha panel investigation the 2013 IPL corruption scandal. Harsh Goenka's RPG group, Chennai-based cement major Chettinad Group and Axis Chemicals were the other three bidders.
Under reverse bidding investors were encouraged to bid for lower than the base price of Rs 40 crore set by the IPL. This meant the BCCI would pay a maximum of Rs 40 crore from its central revenue pool to the new owner. The investor who bid the lowest price would eventually bag the ownership rights. Having bid in the negative, New Rising will now pay Rs 16 crore while Intex will pay Rs 10 crore to the BCCI per year of their contracts.
Goenka has business interests spread across different domains such as power, information technology and media and entertainment. Goenka is also a part of the Kolkata Games and Sports Pvt.Ltd consortium that owns the football franchise Atletico de Kolkata in the Indian Super League
The Delhi-based Intex Technologies specialises in manufacturing smartphones and consumer electronics durables, "I am personally a great sports enthusiast and a cricket lover. We have a great synergy with cricket," Keshav Bansal, the director of Intex, said. "Nothing bigger than the IPL to connect with the youth, which is our target audience. Gujarat is a great cricket-loving state."
According to BCCI president Shashank Manohar the BCCI stood to earn profits of more than Rs 300 crore with the two new franchises declining to accept money from the central revenue pool.
"What we had calculated was that BCCI pays them [franchises] approximate 70 crores first year out of the central revenue and next year it would be 75 crores. So that makes it 145 crore for one team. Now that 145 crore is going to be safe because they are not accepting that central revenue. Plus they are paying us 25 crore so 50 crores [across two years] more. That is the simple calculation," Manohar said at the media conference.
But purely financially this doesn't seem very beneficial for the new franchisees. They look set to suffer losses and will likely relinquish any goodwill generated through two years of their existence as a team. After the two suspended franchises serve their time, they will come back into the IPL fold. Even if the BCCI raises the number of teams to 10 after two years, the new franchises will have to be won through a fresh auction.
Bansal estimated Intex group will have to spend around or more than Rs. 100 crore per year on the players, stadiums, security, logistics, travel, the bid amount etc.
Intex bid in minus for Rajkot while their other two bids for Visakhapatnam and Kanpur were in positive. "We knew the competition was going to be intense," Bansal explained. "So we had a negative bid. We chose Rajkot for a negative bid because Gujarat is a cricket-loving state with a higher spending power. And more importantly Intex is the No. 1 selling Indian handset brand over there.
"We just wanted to be associated with cricket. The window happens to be for just two years. After this if the BCCI wants to continue or raise new teams, why not? The first step was to get into this."
Manohar though, made it clear that the new teams can come in only through a fresh bid at the end of the two years, which will mark the end of the original 10-year franchisee agreements.
Intex said that even if they got just two years they considered this a good investment and Bansal said he looked at entering the IPL as just an extension of his company's association with cricket and the BCCI. "You have to see the synergy from the product and the brand," Bansal said. "We are the official on-air sponsors for 2015. In India cricket is the biggest thing. The idea is to get the best out of that."
Asked whether New Rising was willing to suffer losses and look at entering the IPL as an investment, Subhashish Mitra, the executive director and group company secretary at New Rising, said the owners were looking at serving the sport.
"We love the game of cricket. This is our humble way of getting associated under the great banner of BCCI. We will do our humble bit to support the game of the cricket in India. And this is the endeavour which has driven us to this humble initiative. We love the game of cricket as we love the game of football. This is a small gesture from our side to get involved with the great game of cricket."
The next step for both new franchises will be taking part in a player draft on December 15, where both teams will pick five players each from a pool of Chennai Super Kings and Rajasthan Royals players. Having finished as the lowest bidder, New Rising will get to pick the first player from the 10-player pool. Intex will pick the second player and both teams will alternate thereafter.
For the ten Super Kings and Royals players chosen, the BCCI has applied the same money brackets it put in place two years ago when the other six franchises were allowed to retain five players. The first player gets Rs 12.5 crore, the second Rs 9.5 crore, the third Rs 7.5 crore, the fourth Rs 5.5 crore and the fifth Rs 4 crore. An uncapped player stands to earn Rs 4 crore if he is picked. Irrespective of the IPL fee agreed between the franchise and the retained player, a fixed amount will be deducted from the franchise's salary cap per player retained.
Incidentally, at the franchise auction, all five bidders opted for more than one city from the nine available. The four bidders other than Intex all had Pune on their roster. New Rising bid Rs minus 11 crore for Nagpur. Intex also bid for Nagpur and Visakhapatnam, but quoted Rs 10 crore for each of the two cities. Chettinad, meanwhile, quoted Rs 27 crore for both Pune and Chennai. RPG bid Rs 17.88 crore for Pune and Rs 20.88 crore for Rajkot. Intex bid Rs 10 crore for both Kanpur and Visakhapatnam. Axis, meanwhile, quoted Rs 15 crore for both Nagpur and Kanpur and Rs 10 crore for Pune,
The bidding process lasted for about an hour and was a two-part exercise: the first half involved determining the mandatory technical eligibility of the five bidders followed by a check on the the financial eligibility of the five bidders.