BCCI questions CSK's low valuation

India Cements Limited has proposed to transfer control of Chennai Super Kings to a trust, which has N Srinivasan among the trustees, at only Rs five lakh (approx. $8000), as part of the process to delink the former board president from the franchise to comply with Supreme Court orders. However, the BCCI working committee is likely to discuss the possibility of withdrawing the previous regime's approval to the transfer, due to the extremely low sale price.

According to the IPL franchise agreement, the board is entitled to receive five percent of the sale price for the proposed transfer. Some IPL governing council members pointed out that Super Kings undervaluing itself would result in a financial loss for the BCCI.

During Monday's governing council meeting, the first of the reconstituted body following last month's BCCI AGM and elections, some members objected to the last meeting's proceedings. As a result, the draft minutes of the February 27 meeting, which had approved the proposed change in Super Kings' shareholding, were not ratified.

The draft minutes of the February 27 meeting, accessed by ESPNcricinfo, state the sale price as Rs five lakh. The Super Kings franchise was originally sold to ICL for $91m (Rs 364 crores) in 2008.

The proposal to the BCCI from Chennai Super Kings Limited, the wholly owned subsidiary of ICL, seeks to transfer its shares to a trust, which will have three independent ICL directors as trustees, including Srinivasan. The trust will then distribute those shares to the non-promoter shareholders of ICL, and the promoters' portion (i.e. the Srinivasan group's entitlement) will be transferred to another trust for the benefit of ex-cricketers of India Cements.

Effectively, this will distance Srinivasan from the franchise, which insiders feel is the primary objective of the exercise. Srinivasan's conflict of interest in owning an IPL team and holding BCCI office was criticised severely by the Supreme Court. ICL had later demerged the franchise to CSK Limited.

The proposed transfer of CSK Limited's shares to a trust is the next step in the delinking process. The franchise isn't exactly being sold in the marketplace here. A nominal sale price of Rs five lakh may have been assigned to save on the five percent payout to the BCCI.

During the working committee meeting, one of the members of the anti-Srinivasan group is likely to propose the appointment of an independent valuer to help the BCCI assess the valuation of the franchise. Brand experts are aghast at Super Kings devaluing the franchise so drastically.

"It is outrageous that such a critical business asset and information has been reduced to a farce to suit circumstances," said Unni Krishnan, founder of LongBrand Consulting. "Most of the independent evaluations of CSK point to a value in the range of [Rs] 300-400 crores. It is unlikely such a deviation of many hundreds of crores is realistic even if these studies are based on publicly available information.

"A brand valuation requires a fairly comprehensive review of brand equity factors which drive CSK, its impact on business strategy and financial performance. It is far from guesswork but a fairly detailed and objective exercise. The one which CSK management seems to have undertaken is far from any such internationally recognized approach."

In its last meeting three days before the AGM, the previous governing council, chaired by Srinivasan loyalist Ranjib Biswal, had approved the Super Kings transfer proposal.

However, with the Srinivasan group having lost its footing in the BCCI administration, the new governing council, chaired by Rajiv Shukla and mostly consisting of anti-Srinivasan members, has questioned the decision of the committee chaired by Biswal.